Correlation Between Tesla and Global Quality

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

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

Diversification Opportunities for Tesla and Global Quality

-0.32

Correlation Coefficient

Tesla  Global Quality

Very good diversification

The 3 months correlation between Tesla and Global is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Global Quality Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Quality Portfolio 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 Global Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Quality Portfolio has no effect on the direction of Tesla i.e., Tesla and Global Quality go up and down completely randomly.

Pair Corralation between Tesla and Global Quality

Given the investment horizon of 90 days Tesla Inc is expected to under-perform the Global Quality. In addition to that, Tesla is 3.87 times more volatile than Global Quality Portfolio. It trades about -0.26 of its total potential returns per unit of risk. Global Quality Portfolio is currently generating about -0.4 per unit of volatility. If you would invest  1,896  in Global Quality Portfolio on January 20, 2024 and sell it today you would lose (109.00) from holding Global Quality Portfolio or give up 5.75% of portfolio value over 90 days.

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

Tesla Inc  vs.  Global Quality Portfolio

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 abnormal 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.

Global Quality Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Quality Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Global Quality is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tesla and Global Quality

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

The idea behind Tesla Inc and Global Quality Portfolio 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.