Correlation Between Tesla and Austin Engineering
Can any of the company-specific risk be diversified away by investing in both Tesla and Austin Engineering 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 Austin Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Austin Engineering Limited, you can compare the effects of market volatilities on Tesla and Austin Engineering 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 Austin Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Austin Engineering.
Diversification Opportunities for Tesla and Austin Engineering
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tesla and Austin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Austin Engineering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austin Engineering 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 Austin Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austin Engineering has no effect on the direction of Tesla i.e., Tesla and Austin Engineering go up and down completely randomly.
Pair Corralation between Tesla and Austin Engineering
Given the investment horizon of 90 days Tesla Inc is expected to generate 0.47 times more return on investment than Austin Engineering. However, Tesla Inc is 2.14 times less risky than Austin Engineering. It trades about 0.1 of its potential returns per unit of risk. Austin Engineering Limited is currently generating about 0.03 per unit of risk. If you would invest 37,928 in Tesla Inc on November 2, 2024 and sell it today you would earn a total of 2,100 from holding Tesla Inc or generate 5.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Tesla Inc vs. Austin Engineering Limited
Performance |
| Timeline |
| Tesla Inc |
| Austin Engineering |
Tesla and Austin Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Austin Engineering
The main advantage of trading using opposite Tesla and Austin Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Austin Engineering 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 Austin Engineering will offset losses from the drop in Austin Engineering's long position.The idea behind Tesla Inc and Austin Engineering Limited 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.| Austin Engineering vs. American Premium Water | Austin Engineering vs. AmeraMex International | Austin Engineering vs. Arts Way Manufacturing Co | Austin Engineering vs. Astec Industries |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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