Correlation Between Tesla and Vanguard Consumer
Can any of the company-specific risk be diversified away by investing in both Tesla and Vanguard Consumer 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 Vanguard Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Vanguard Consumer Discretionary, you can compare the effects of market volatilities on Tesla and Vanguard Consumer 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 Vanguard Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Vanguard Consumer.
Diversification Opportunities for Tesla and Vanguard Consumer
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Tesla and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Vanguard Consumer Discretionar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Consumer 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 Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Consumer has no effect on the direction of Tesla i.e., Tesla and Vanguard Consumer go up and down completely randomly.
Pair Corralation between Tesla and Vanguard Consumer
Given the investment horizon of 90 days Tesla Inc is expected to generate 5.05 times more return on investment than Vanguard Consumer. However, Tesla is 5.05 times more volatile than Vanguard Consumer Discretionary. It trades about 0.35 of its potential returns per unit of risk. Vanguard Consumer Discretionary is currently generating about 0.35 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 Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. Vanguard Consumer Discretionar
Performance |
| Timeline |
| Tesla Inc |
| Vanguard Consumer |
Tesla and Vanguard Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Vanguard Consumer
The main advantage of trading using opposite Tesla and Vanguard Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Vanguard Consumer 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 Vanguard Consumer will offset losses from the drop in Vanguard Consumer's long position.The idea behind Tesla Inc and Vanguard Consumer Discretionary 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.| Vanguard Consumer vs. iShares Global Industrials | Vanguard Consumer vs. iShares Global Consumer | Vanguard Consumer vs. iShares Global Utilities | Vanguard Consumer vs. iShares Global Financials |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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