Correlation Between Tesla and Lotus Technology
Can any of the company-specific risk be diversified away by investing in both Tesla and Lotus Technology 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 Lotus Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Lotus Technology American, you can compare the effects of market volatilities on Tesla and Lotus Technology 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 Lotus Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Lotus Technology.
Diversification Opportunities for Tesla and Lotus Technology
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Tesla and Lotus is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Lotus Technology American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Technology American 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 Lotus Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Technology American has no effect on the direction of Tesla i.e., Tesla and Lotus Technology go up and down completely randomly.
Pair Corralation between Tesla and Lotus Technology
Given the investment horizon of 90 days Tesla Inc is expected to generate 1.13 times more return on investment than Lotus Technology. However, Tesla is 1.13 times more volatile than Lotus Technology American. It trades about 0.21 of its potential returns per unit of risk. Lotus Technology American is currently generating about -0.35 per unit of risk. If you would invest 35,000 in Tesla Inc on September 12, 2024 and sell it today you would earn a total of 5,099 from holding Tesla Inc or generate 14.57% 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. Lotus Technology American
Performance |
| Timeline |
| Tesla Inc |
| Lotus Technology American |
Tesla and Lotus Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Lotus Technology
The main advantage of trading using opposite Tesla and Lotus Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Lotus Technology 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 Lotus Technology will offset losses from the drop in Lotus Technology's long position.The idea behind Tesla Inc and Lotus Technology American 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.| Lotus Technology vs. Universal | Lotus Technology vs. The Coca Cola | Lotus Technology vs. Guangdong Investment Limited | Lotus Technology vs. Diageo PLC ADR |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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