Correlation Between Tesla and Capital Clean
Can any of the company-specific risk be diversified away by investing in both Tesla and Capital Clean 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 Capital Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Capital Clean Energy, you can compare the effects of market volatilities on Tesla and Capital Clean 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 Capital Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Capital Clean.
Diversification Opportunities for Tesla and Capital Clean
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Tesla and Capital is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Capital Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Clean Energy 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 Capital Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Clean Energy has no effect on the direction of Tesla i.e., Tesla and Capital Clean go up and down completely randomly.
Pair Corralation between Tesla and Capital Clean
Given the investment horizon of 90 days Tesla Inc is expected to generate 1.88 times more return on investment than Capital Clean. However, Tesla is 1.88 times more volatile than Capital Clean Energy. It trades about 0.04 of its potential returns per unit of risk. Capital Clean Energy is currently generating about 0.05 per unit of risk. If you would invest 24,983 in Tesla Inc on September 4, 2024 and sell it today you would earn a total of 10,726 from holding Tesla Inc or generate 42.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. Capital Clean Energy
Performance |
| Timeline |
| Tesla Inc |
| Capital Clean Energy |
Tesla and Capital Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Capital Clean
The main advantage of trading using opposite Tesla and Capital Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Capital Clean 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 Capital Clean will offset losses from the drop in Capital Clean's long position.The idea behind Tesla Inc and Capital Clean Energy 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.| Capital Clean vs. Sphere Entertainment Co | Capital Clean vs. Herc Holdings | Capital Clean vs. Reservoir Media | Capital Clean vs. Triton International Limited |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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