Correlation Between Tesla and Faraday Future
Can any of the company-specific risk be diversified away by investing in both Tesla and Faraday Future 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 Faraday Future into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Faraday Future Intelligent, you can compare the effects of market volatilities on Tesla and Faraday Future 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 Faraday Future. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Faraday Future.
Diversification Opportunities for Tesla and Faraday Future
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Tesla and Faraday is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Faraday Future Intelligent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Future Intel 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 Faraday Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Future Intel has no effect on the direction of Tesla i.e., Tesla and Faraday Future go up and down completely randomly.
Pair Corralation between Tesla and Faraday Future
Given the investment horizon of 90 days Tesla Inc is expected to generate 0.54 times more return on investment than Faraday Future. However, Tesla Inc is 1.86 times less risky than Faraday Future. It trades about 0.18 of its potential returns per unit of risk. Faraday Future Intelligent is currently generating about -0.15 per unit of risk. If you would invest 21,060 in Tesla Inc on August 31, 2024 and sell it today you would earn a total of 12,229 from holding Tesla Inc or generate 58.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. Faraday Future Intelligent
Performance |
| Timeline |
| Tesla Inc |
| Faraday Future Intel |
Tesla and Faraday Future Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Faraday Future
The main advantage of trading using opposite Tesla and Faraday Future positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Faraday Future 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 Faraday Future will offset losses from the drop in Faraday Future's long position.The idea behind Tesla Inc and Faraday Future Intelligent 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.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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