Correlation Between Tesla and Air Lease
Can any of the company-specific risk be diversified away by investing in both Tesla and Air Lease at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Tesla and Air Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Air Lease, you can compare the effects of market volatilities on Tesla and Air Lease and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Tesla with a short position of Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Air Lease.
Diversification Opportunities for Tesla and Air Lease
Very poor diversification
The 3 months correlation between Tesla and Air is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Tesla is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Tesla Inc are associated (or correlated) with Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Tesla i.e., Tesla and Air Lease go up and down completely randomly.
Pair Corralation between Tesla and Air Lease
Given the investment horizon of 90 days Tesla Inc is expected to generate 2.02 times more return on investment than Air Lease. However, Tesla is 2.02 times more volatile than Air Lease. It trades about 0.04 of its potential returns per unit of risk. Air Lease is currently generating about 0.04 per unit of risk. If you would invest 24,983 in Tesla Inc on September 2, 2024 and sell it today you would earn a total of 9,533 from holding Tesla Inc or generate 38.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. Air Lease
Performance |
| Timeline |
| Tesla Inc |
| Air Lease |
Tesla and Air Lease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Air Lease
The main advantage of trading using opposite Tesla and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Air Lease can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Air Lease will offset losses from the drop in Air Lease's long position.The idea behind Tesla Inc and Air Lease pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Air Lease vs. Alta Equipment Group | Air Lease vs. McGrath RentCorp | Air Lease vs. Herc Holdings | Air Lease vs. HE Equipment Services |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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