Correlation Between Tesla and United

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

By analyzing existing cross correlation between Tesla Inc and United Rentals 525, you can compare the effects of market volatilities on Tesla and United 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 United. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and United.

Diversification Opportunities for Tesla and United

0.61

Correlation Coefficient

Tesla  United

Poor diversification

The 3 months correlation between Tesla and United is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and United Rentals 525 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals 525 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 United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Rentals 525 has no effect on the direction of Tesla i.e., Tesla and United go up and down completely randomly.

Pair Corralation between Tesla and United

Given the investment horizon of 90 days Tesla Inc is expected to generate 4.23 times more return on investment than United. However, Tesla is 4.23 times more volatile than United Rentals 525. It trades about 0.02 of its potential returns per unit of risk. United Rentals 525 is currently generating about 0.0 per unit of risk. If you would invest  16,183  in Tesla Inc on January 26, 2024 and sell it today you would earn a total of  30.00  from holding Tesla Inc or generate 0.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Tesla Inc  vs.  United Rentals 525

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 latest abnormal performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

United Rentals 525

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Rentals 525 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, United is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tesla and United

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

The idea behind Tesla Inc and United Rentals 525 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.