Correlation Between Tesla and Mako Mining

Can any of the company-specific risk be diversified away by investing in both Tesla and Mako Mining 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 Mako Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tesla Inc CDR and Mako Mining Corp, you can compare the effects of market volatilities on Tesla and Mako Mining 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 Mako Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Mako Mining.

Diversification Opportunities for Tesla and Mako Mining

-0.2

Correlation Coefficient

Tesla  Mako Mining

Good diversification

The 3 months correlation between Tesla and Mako is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and Mako Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mako Mining Corp 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 CDR are associated (or correlated) with Mako Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mako Mining Corp has no effect on the direction of Tesla i.e., Tesla and Mako Mining go up and down completely randomly.

Pair Corralation between Tesla and Mako Mining

Assuming the 90 days trading horizon Tesla Inc CDR is expected to generate 1.3 times more return on investment than Mako Mining. However, Tesla is 1.3 times more volatile than Mako Mining Corp. It trades about -0.07 of its potential returns per unit of risk. Mako Mining Corp is currently generating about -0.2 per unit of risk. If you would invest  1,698  in Tesla Inc CDR on March 5, 2024 and sell it today you would lose (62.00) from holding Tesla Inc CDR or give up 3.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Tesla Inc CDR  vs.  Mako Mining Corp

Tesla Inc CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tesla Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Tesla is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Mako Mining Corp

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mako Mining Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Mako Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tesla and Mako Mining

The main advantage of trading using opposite Tesla and Mako Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Mako Mining 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 Mako Mining will offset losses from the drop in Mako Mining's long position.

The idea behind Tesla Inc CDR and Mako Mining Corp 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..