Correlation Between Tesla and Tata Motors
Can any of the company-specific risk be diversified away by investing in both Tesla and Tata Motors 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 Tata Motors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Tata Motors Limited, you can compare the effects of market volatilities on Tesla and Tata Motors 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 Tata Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Tata Motors.
Diversification Opportunities for Tesla and Tata Motors
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tesla and Tata is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Tata Motors Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Motors Limited 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 Tata Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Motors Limited has no effect on the direction of Tesla i.e., Tesla and Tata Motors go up and down completely randomly.
Pair Corralation between Tesla and Tata Motors
Given the investment horizon of 90 days Tesla is expected to generate 1.17 times less return on investment than Tata Motors. In addition to that, Tesla is 2.23 times more volatile than Tata Motors Limited. It trades about 0.08 of its total potential returns per unit of risk. Tata Motors Limited is currently generating about 0.21 per unit of volatility. If you would invest 2,286 in Tata Motors Limited on September 12, 2024 and sell it today you would earn a total of 228.00 from holding Tata Motors Limited or generate 9.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 5.66% |
| Values | Daily Returns |
Tesla Inc vs. Tata Motors Limited
Performance |
| Timeline |
| Tesla Inc |
| Tata Motors Limited |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Tesla and Tata Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Tata Motors
The main advantage of trading using opposite Tesla and Tata Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Tata Motors 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 Tata Motors will offset losses from the drop in Tata Motors' long position.The idea behind Tesla Inc and Tata Motors Limited 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.| Tata Motors vs. Codexis | Tata Motors vs. WiMi Hologram Cloud | Tata Motors vs. Tesla Inc | Tata Motors vs. Pinterest |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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