Correlation Between Tesla and Primo Brands
Can any of the company-specific risk be diversified away by investing in both Tesla and Primo Brands 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 Primo Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Primo Brands, you can compare the effects of market volatilities on Tesla and Primo Brands 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 Primo Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Primo Brands.
Diversification Opportunities for Tesla and Primo Brands
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tesla and Primo is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Primo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primo Brands 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 Primo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primo Brands has no effect on the direction of Tesla i.e., Tesla and Primo Brands go up and down completely randomly.
Pair Corralation between Tesla and Primo Brands
Given the investment horizon of 90 days Tesla Inc is expected to generate 2.03 times more return on investment than Primo Brands. However, Tesla is 2.03 times more volatile than Primo Brands. It trades about 0.11 of its potential returns per unit of risk. Primo Brands is currently generating about 0.14 per unit of risk. If you would invest 37,928 in Tesla Inc on November 3, 2024 and sell it today you would earn a total of 2,532 from holding Tesla Inc or generate 6.68% 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. Primo Brands
Performance |
| Timeline |
| Tesla Inc |
| Primo Brands |
Tesla and Primo Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Primo Brands
The main advantage of trading using opposite Tesla and Primo Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Primo Brands 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 Primo Brands will offset losses from the drop in Primo Brands' long position.The idea behind Tesla Inc and Primo Brands 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.| Primo Brands vs. Corsair Gaming | Primo Brands vs. Old Dominion Freight | Primo Brands vs. EvoAir Holdings | Primo Brands vs. flyExclusive, |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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