Correlation Between Tesla and GMX
Can any of the company-specific risk be diversified away by investing in both Tesla and GMX 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 GMX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and GMX, you can compare the effects of market volatilities on Tesla and GMX 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 GMX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and GMX.
Diversification Opportunities for Tesla and GMX
Very weak diversification
The 3 months correlation between Tesla and GMX is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and GMX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMX 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 GMX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMX has no effect on the direction of Tesla i.e., Tesla and GMX go up and down completely randomly.
Pair Corralation between Tesla and GMX
Given the investment horizon of 90 days Tesla Inc is expected to generate 0.62 times more return on investment than GMX. However, Tesla Inc is 1.63 times less risky than GMX. It trades about 0.05 of its potential returns per unit of risk. GMX is currently generating about -0.03 per unit of risk. If you would invest 19,476 in Tesla Inc on August 27, 2024 and sell it today you would earn a total of 15,780 from holding Tesla Inc or generate 81.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 56.04% |
| Values | Daily Returns |
Tesla Inc vs. GMX
Performance |
| Timeline |
| Tesla Inc |
| GMX |
Tesla and GMX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and GMX
The main advantage of trading using opposite Tesla and GMX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, GMX 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 GMX will offset losses from the drop in GMX's long position.The idea behind Tesla Inc and GMX 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |