Correlation Between Tesla and SNDL
Can any of the company-specific risk be diversified away by investing in both Tesla and SNDL 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 SNDL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and SNDL Inc, you can compare the effects of market volatilities on Tesla and SNDL 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 SNDL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and SNDL.
Diversification Opportunities for Tesla and SNDL
Excellent diversification
The 3 months correlation between Tesla and SNDL is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc 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 SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Tesla i.e., Tesla and SNDL go up and down completely randomly.
Pair Corralation between Tesla and SNDL
Given the investment horizon of 90 days Tesla Inc is expected to generate 2.46 times more return on investment than SNDL. However, Tesla is 2.46 times more volatile than SNDL Inc. It trades about 0.4 of its potential returns per unit of risk. SNDL Inc is currently generating about -0.32 per unit of risk. If you would invest 32,849 in Tesla Inc on September 13, 2024 and sell it today you would earn a total of 9,628 from holding Tesla Inc or generate 29.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. SNDL Inc
Performance |
| Timeline |
| Tesla Inc |
| SNDL Inc |
Tesla and SNDL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and SNDL
The main advantage of trading using opposite Tesla and SNDL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, SNDL 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 SNDL will offset losses from the drop in SNDL's long position.The idea behind Tesla Inc and SNDL Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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