Correlation Between American Funds and Tesla
Can any of the company-specific risk be diversified away by investing in both American Funds and Tesla 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 American Funds and Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2050 and Tesla Inc, you can compare the effects of market volatilities on American Funds and Tesla 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 American Funds with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Tesla.
Diversification Opportunities for American Funds and Tesla
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Tesla is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2050 and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and American Funds 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 American Funds 2050 are associated (or correlated) with Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of American Funds i.e., American Funds and Tesla go up and down completely randomly.
Pair Corralation between American Funds and Tesla
Assuming the 90 days horizon American Funds 2050 is expected to generate 0.25 times more return on investment than Tesla. However, American Funds 2050 is 4.06 times less risky than Tesla. It trades about 0.08 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.01 per unit of risk. If you would invest 1,454 in American Funds 2050 on March 4, 2024 and sell it today you would earn a total of 526.00 from holding American Funds 2050 or generate 36.18% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
American Funds 2050 vs. Tesla Inc
Performance |
Timeline |
American Funds 2050 |
Tesla Inc |
American Funds and Tesla Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Funds and Tesla
The main advantage of trading using opposite American Funds and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
Stocks Directory Find actively traded stocks across global markets | |
Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
Bonds Directory Find actively traded corporate debentures issued by US companies | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |