Correlation Between Tesla and Lear

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

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

Diversification Opportunities for Tesla and Lear

-0.13

Correlation Coefficient

Tesla  Lear

Good diversification

The 3 months correlation between Tesla and Lear is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Lear Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lear 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 Lear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lear has no effect on the direction of Tesla i.e., Tesla and Lear go up and down completely randomly.

Pair Corralation between Tesla and Lear

Given the investment horizon of 90 days Tesla Inc is expected to generate 2.26 times more return on investment than Lear. However, Tesla is 2.26 times more volatile than Lear Corporation. It trades about 0.09 of its potential returns per unit of risk. Lear Corporation is currently generating about -0.28 per unit of risk. If you would invest  16,663  in Tesla Inc on February 2, 2024 and sell it today you would earn a total of  1,336  from holding Tesla Inc or generate 8.02% return on investment over 90 days.

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

Tesla Inc  vs.  Lear Corp.

Tesla Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tesla Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Tesla is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Lear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lear Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Tesla and Lear

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

The idea behind Tesla Inc and Lear Corporation 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.