Correlation Between Tesla and Procter Gamble
Can any of the company-specific risk be diversified away by investing in both Tesla and Procter Gamble 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 Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Procter Gamble, you can compare the effects of market volatilities on Tesla and Procter Gamble 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 Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Procter Gamble.
Diversification Opportunities for Tesla and Procter Gamble
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tesla and Procter is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Tesla i.e., Tesla and Procter Gamble go up and down completely randomly.
Pair Corralation between Tesla and Procter Gamble
Given the investment horizon of 90 days Tesla Inc is expected to generate 4.27 times more return on investment than Procter Gamble. However, Tesla is 4.27 times more volatile than Procter Gamble. It trades about 0.26 of its potential returns per unit of risk. Procter Gamble is currently generating about 0.19 per unit of risk. If you would invest 26,251 in Tesla Inc on August 28, 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. Procter Gamble
Performance |
| Timeline |
| Tesla Inc |
| Procter Gamble |
Tesla and Procter Gamble Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Procter Gamble
The main advantage of trading using opposite Tesla and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Procter Gamble 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 Procter Gamble will offset losses from the drop in Procter Gamble's long position.The idea behind Tesla Inc and Procter Gamble 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.| Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Estee Lauder Companies | Procter Gamble vs. ELF Beauty | Procter Gamble vs. Coty Inc |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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