Correlation Between E Home and Tesla

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

By analyzing existing cross correlation between E Home Household Service and Tesla Inc, you can compare the effects of market volatilities on E Home and Tesla 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 E Home with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Home and Tesla.

Diversification Opportunities for E Home and Tesla

-0.8

Correlation Coefficient

E Home  Tesla

Pay attention - limited upside

The 3 months correlation between EJH and Tesla is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding E Home Household Service and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and E Home 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 E Home Household Service are associated (or correlated) with Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of E Home i.e., E Home and Tesla go up and down completely randomly.

Pair Corralation between E Home and Tesla

Considering the 90-day investment horizon E Home Household Service is expected to under-perform the Tesla. In addition to that, E Home is 1.5 times more volatile than Tesla Inc. It trades about -0.01 of its total potential returns per unit of risk. Tesla Inc is currently generating about 0.6 per unit of volatility. If you would invest  33,874  in Tesla Inc on September 18, 2024 and sell it today you would earn a total of  14,112  from holding Tesla Inc or generate 41.66% return on investment over 90 days.

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

E Home Household Service  vs.  Tesla Inc

E Home Household

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Home Household Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward-looking indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Tesla Inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E Home and Tesla

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

The idea behind E Home Household Service and Tesla Inc 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.