Correlation Between Tesla and Ferrari NV

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

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

Diversification Opportunities for Tesla and Ferrari NV

-0.3

Correlation Coefficient

Tesla  Ferrari NV

Very good diversification

The 3 months correlation between Tesla and Ferrari is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Ferrari NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrari NV 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 Ferrari NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrari NV has no effect on the direction of Tesla i.e., Tesla and Ferrari NV go up and down completely randomly.

Pair Corralation between Tesla and Ferrari NV

Given the investment horizon of 90 days Tesla is expected to generate 11.75 times less return on investment than Ferrari NV. In addition to that, Tesla is 2.19 times more volatile than Ferrari NV. It trades about 0.0 of its total potential returns per unit of risk. Ferrari NV is currently generating about 0.11 per unit of volatility. If you would invest  18,070  in Ferrari NV on February 7, 2024 and sell it today you would earn a total of  24,959  from holding Ferrari NV or generate 138.12% 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.  Ferrari NV

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.

Ferrari NV

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrari NV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Ferrari NV exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tesla and Ferrari NV

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

The idea behind Tesla Inc and Ferrari NV 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 Transaction History module to view history of all your transactions and understand their impact on performance.