Correlation Between Tesla and Micropac Industries
Can any of the company-specific risk be diversified away by investing in both Tesla and Micropac Industries 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 Micropac Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Micropac Industries, you can compare the effects of market volatilities on Tesla and Micropac Industries 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 Micropac Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Micropac Industries.
Diversification Opportunities for Tesla and Micropac Industries
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tesla and Micropac is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Micropac Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micropac Industries 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 Micropac Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micropac Industries has no effect on the direction of Tesla i.e., Tesla and Micropac Industries go up and down completely randomly.
Pair Corralation between Tesla and Micropac Industries
Given the investment horizon of 90 days Tesla Inc is expected to generate 1.14 times more return on investment than Micropac Industries. However, Tesla is 1.14 times more volatile than Micropac Industries. It trades about 0.05 of its potential returns per unit of risk. Micropac Industries is currently generating about 0.04 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 | Significant |
| Accuracy | 84.4% |
| Values | Daily Returns |
Tesla Inc vs. Micropac Industries
Performance |
| Timeline |
| Tesla Inc |
| Micropac Industries |
Tesla and Micropac Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Micropac Industries
The main advantage of trading using opposite Tesla and Micropac Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Micropac Industries 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 Micropac Industries will offset losses from the drop in Micropac Industries' long position.The idea behind Tesla Inc and Micropac Industries 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.| Micropac Industries vs. LGL Group | Micropac Industries vs. Deswell Industries | Micropac Industries vs. SigmaTron International | Micropac Industries vs. Daktronics |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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