Correlation Between Tesla and IShares Small
Can any of the company-specific risk be diversified away by investing in both Tesla and IShares Small 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 IShares Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and iShares Small Cap, you can compare the effects of market volatilities on Tesla and IShares Small 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 IShares Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and IShares Small.
Diversification Opportunities for Tesla and IShares Small
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tesla and IShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and iShares Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Small Cap 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 IShares Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Small Cap has no effect on the direction of Tesla i.e., Tesla and IShares Small go up and down completely randomly.
Pair Corralation between Tesla and IShares Small
Given the investment horizon of 90 days Tesla Inc is expected to generate 2.84 times more return on investment than IShares Small. However, Tesla is 2.84 times more volatile than iShares Small Cap. It trades about 0.09 of its potential returns per unit of risk. iShares Small Cap is currently generating about 0.08 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. iShares Small Cap
Performance |
| Timeline |
| Tesla Inc |
| iShares Small Cap |
Tesla and IShares Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and IShares Small
The main advantage of trading using opposite Tesla and IShares Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, IShares Small 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 IShares Small will offset losses from the drop in IShares Small's long position.The idea behind Tesla Inc and iShares Small Cap 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.| IShares Small vs. Horizon Kinetics Inflation | IShares Small vs. Virtus ETF Trust | IShares Small vs. Invesco SP SmallCap | IShares Small vs. iShares MSCI USA |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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