Correlation Between Tesla and PAM Transportation
Can any of the company-specific risk be diversified away by investing in both Tesla and PAM Transportation 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 PAM Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and PAM Transportation Services, you can compare the effects of market volatilities on Tesla and PAM Transportation 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 PAM Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and PAM Transportation.
Diversification Opportunities for Tesla and PAM Transportation
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Tesla and PAM is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and PAM Transportation Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAM Transportation 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 PAM Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAM Transportation has no effect on the direction of Tesla i.e., Tesla and PAM Transportation go up and down completely randomly.
Pair Corralation between Tesla and PAM Transportation
Given the investment horizon of 90 days Tesla Inc is expected to generate 1.12 times more return on investment than PAM Transportation. However, Tesla is 1.12 times more volatile than PAM Transportation Services. It trades about 0.09 of its potential returns per unit of risk. PAM Transportation Services is currently generating about 0.04 per unit of risk. If you would invest 20,188 in Tesla Inc on August 27, 2024 and sell it today you would earn a total of 15,068 from holding Tesla Inc or generate 74.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.74% |
| Values | Daily Returns |
Tesla Inc vs. PAM Transportation Services
Performance |
| Timeline |
| Tesla Inc |
| PAM Transportation |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Tesla and PAM Transportation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and PAM Transportation
The main advantage of trading using opposite Tesla and PAM Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, PAM Transportation 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 PAM Transportation will offset losses from the drop in PAM Transportation's long position.The idea behind Tesla Inc and PAM Transportation Services 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.| PAM Transportation vs. Heartland Express | PAM Transportation vs. Werner Enterprises | PAM Transportation vs. Universal Logistics Holdings | PAM Transportation vs. Schneider National |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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