Correlation Between Faraday Future and Tesla

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Can any of the company-specific risk be diversified away by investing in both Faraday Future 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 Faraday Future and Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Faraday Future Intelligent and Tesla Inc, you can compare the effects of market volatilities on Faraday Future 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 Faraday Future with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faraday Future and Tesla.

Diversification Opportunities for Faraday Future and Tesla

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Faraday and Tesla is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Future Intelligent and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Faraday Future 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 Faraday Future Intelligent 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 Faraday Future i.e., Faraday Future and Tesla go up and down completely randomly.

Pair Corralation between Faraday Future and Tesla

Given the investment horizon of 90 days Faraday Future Intelligent is expected to under-perform the Tesla. In addition to that, Faraday Future is 5.5 times more volatile than Tesla Inc. It trades about -0.2 of its total potential returns per unit of risk. Tesla Inc is currently generating about -0.15 per unit of volatility. If you would invest  19,973  in Tesla Inc on December 29, 2023 and sell it today you would lose (1,990) from holding Tesla Inc or give up 9.96% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Faraday Future Intelligent  vs.  Tesla Inc

 Performance 
       Timeline  
Faraday Future Intel 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Faraday Future Intelligent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Tesla Inc 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Tesla Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Faraday Future and Tesla Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Faraday Future and Tesla

The main advantage of trading using opposite Faraday Future and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faraday Future 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.
The idea behind Faraday Future Intelligent and Tesla 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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