Correlation Between Tesla and Kadant
Can any of the company-specific risk be diversified away by investing in both Tesla and Kadant 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 Kadant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Kadant Inc, you can compare the effects of market volatilities on Tesla and Kadant 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 Kadant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Kadant.
Diversification Opportunities for Tesla and Kadant
Excellent diversification
The 3 months correlation between Tesla and Kadant is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Kadant Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kadant Inc 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 Kadant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kadant Inc has no effect on the direction of Tesla i.e., Tesla and Kadant go up and down completely randomly.
Pair Corralation between Tesla and Kadant
Given the investment horizon of 90 days Tesla Inc is expected to under-perform the Kadant. In addition to that, Tesla is 1.11 times more volatile than Kadant Inc. It trades about -0.29 of its total potential returns per unit of risk. Kadant Inc is currently generating about 0.12 per unit of volatility. If you would invest 36,703 in Kadant Inc on November 18, 2024 and sell it today you would earn a total of 2,143 from holding Kadant Inc or generate 5.84% 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. Kadant Inc
Performance |
| Timeline |
| Tesla Inc |
| Kadant Inc |
Tesla and Kadant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Kadant
The main advantage of trading using opposite Tesla and Kadant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Kadant 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 Kadant will offset losses from the drop in Kadant's long position.The idea behind Tesla Inc and Kadant Inc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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