Correlation Between Tesla and Park Ohio
Can any of the company-specific risk be diversified away by investing in both Tesla and Park Ohio 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 Park Ohio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Park Ohio Holdings, you can compare the effects of market volatilities on Tesla and Park Ohio 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 Park Ohio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Park Ohio.
Diversification Opportunities for Tesla and Park Ohio
Very poor diversification
The 3 months correlation between Tesla and Park is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Park Ohio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Ohio Holdings 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 Park Ohio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Ohio Holdings has no effect on the direction of Tesla i.e., Tesla and Park Ohio go up and down completely randomly.
Pair Corralation between Tesla and Park Ohio
Given the investment horizon of 90 days Tesla Inc is expected to generate 1.87 times more return on investment than Park Ohio. However, Tesla is 1.87 times more volatile than Park Ohio Holdings. It trades about 0.19 of its potential returns per unit of risk. Park Ohio Holdings is currently generating about 0.09 per unit of risk. If you would invest 21,060 in Tesla Inc on September 2, 2024 and sell it today you would earn a total of 13,456 from holding Tesla Inc or generate 63.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. Park Ohio Holdings
Performance |
| Timeline |
| Tesla Inc |
| Park Ohio Holdings |
Tesla and Park Ohio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Park Ohio
The main advantage of trading using opposite Tesla and Park Ohio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Park Ohio 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 Park Ohio will offset losses from the drop in Park Ohio's long position.The idea behind Tesla Inc and Park Ohio Holdings 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.| Park Ohio vs. Hurco Companies | Park Ohio vs. Enerpac Tool Group | Park Ohio vs. China Yuchai International | Park Ohio vs. Luxfer Holdings PLC |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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