Correlation Between NWTN and Tesla

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

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

Diversification Opportunities for NWTN and Tesla

-0.47

Correlation Coefficient

NWTN  Tesla

Very good diversification

The 3 months correlation between NWTN and Tesla is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding NWTN Class B and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and NWTN 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 NWTN Class B 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 NWTN i.e., NWTN and Tesla go up and down completely randomly.

Pair Corralation between NWTN and Tesla

Given the investment horizon of 90 days NWTN Class B is expected to generate 2.14 times more return on investment than Tesla. However, NWTN is 2.14 times more volatile than Tesla Inc. It trades about 0.15 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.09 per unit of risk. If you would invest  80.00  in NWTN Class B on June 9, 2024 and sell it today you would earn a total of  18.00  from holding NWTN Class B or generate 22.5% return on investment over 90 days.

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

NWTN Class B  vs.  Tesla Inc

NWTN Class B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NWTN Class B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in October 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Tesla Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 7 (%) 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 NWTN and Tesla

The main advantage of trading using opposite NWTN and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NWTN 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 NWTN Class B 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.