Correlation Between Tesla and Paramount Global
Can any of the company-specific risk be diversified away by investing in both Tesla and Paramount Global 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 Paramount Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Paramount Global Class, you can compare the effects of market volatilities on Tesla and Paramount Global 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 Paramount Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Paramount Global.
Diversification Opportunities for Tesla and Paramount Global
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tesla and Paramount is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Paramount Global Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Global Class 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 Paramount Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Global Class has no effect on the direction of Tesla i.e., Tesla and Paramount Global go up and down completely randomly.
Pair Corralation between Tesla and Paramount Global
Given the investment horizon of 90 days Tesla Inc is expected to generate 1.97 times more return on investment than Paramount Global. However, Tesla is 1.97 times more volatile than Paramount Global Class. It trades about 0.26 of its potential returns per unit of risk. Paramount Global Class is currently generating about 0.09 per unit of risk. If you would invest 26,251 in Tesla Inc on August 27, 2024 and sell it today you would earn a total of 7,608 from holding Tesla Inc or generate 28.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. Paramount Global Class
Performance |
| Timeline |
| Tesla Inc |
| Paramount Global Class |
Tesla and Paramount Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Paramount Global
The main advantage of trading using opposite Tesla and Paramount Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Paramount Global 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 Paramount Global will offset losses from the drop in Paramount Global's long position.The idea behind Tesla Inc and Paramount Global Class 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.| Paramount Global vs. Walt Disney | Paramount Global vs. Roku Inc | Paramount Global vs. Netflix | Paramount Global vs. AMC Entertainment Holdings |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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