Correlation Between Tesla and Equillium

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

Diversification Opportunities for Tesla and Equillium

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between Tesla and Equillium is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Equillium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equillium 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 Equillium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equillium has no effect on the direction of Tesla i.e., Tesla and Equillium go up and down completely randomly.

Pair Corralation between Tesla and Equillium

Given the investment horizon of 90 days Tesla Inc is expected to under-perform the Equillium. But the stock apears to be less risky and, when comparing its historical volatility, Tesla Inc is 1.73 times less risky than Equillium. The stock trades about -0.02 of its potential returns per unit of risk. The Equillium is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  252.00  in Equillium on January 22, 2024 and sell it today you would lose (91.00) from holding Equillium or give up 36.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Tesla Inc  vs.  Equillium

 Performance 
       Timeline  
Tesla Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
Equillium 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Equillium are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Equillium reported solid returns over the last few months and may actually be approaching a breakup point.

Tesla and Equillium Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tesla and Equillium

The main advantage of trading using opposite Tesla and Equillium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Equillium 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 Equillium will offset losses from the drop in Equillium's long position.
The idea behind Tesla Inc and Equillium 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 CEOs Directory module to screen CEOs from public companies around the world.

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