Correlation Between Tesla and Safe

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Can any of the company-specific risk be diversified away by investing in both Tesla and Safe 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 Safe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Safe, you can compare the effects of market volatilities on Tesla and Safe 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 Safe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Safe.

Diversification Opportunities for Tesla and Safe

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Tesla and Safe is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Safe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safe 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 Safe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safe has no effect on the direction of Tesla i.e., Tesla and Safe go up and down completely randomly.

Pair Corralation between Tesla and Safe

Given the investment horizon of 90 days Tesla Inc is expected to generate 0.96 times more return on investment than Safe. However, Tesla Inc is 1.04 times less risky than Safe. It trades about 0.35 of its potential returns per unit of risk. Safe is currently generating about -0.12 per unit of risk. If you would invest  21,365  in Tesla Inc on August 24, 2024 and sell it today you would earn a total of  12,599  from holding Tesla Inc or generate 58.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Tesla Inc  vs.  Safe

 Performance 
       Timeline  
Tesla Inc 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.
Safe 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Safe are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Safe exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tesla and Safe Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tesla and Safe

The main advantage of trading using opposite Tesla and Safe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Safe 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 Safe will offset losses from the drop in Safe's long position.
The idea behind Tesla Inc and Safe 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.
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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