Correlation Between Aptiv PLC and Teradyne

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Can any of the company-specific risk be diversified away by investing in both Aptiv PLC and Teradyne 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 Aptiv PLC and Teradyne into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aptiv PLC and Teradyne, you can compare the effects of market volatilities on Aptiv PLC and Teradyne 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 Aptiv PLC with a short position of Teradyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptiv PLC and Teradyne.

Diversification Opportunities for Aptiv PLC and Teradyne

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Aptiv and Teradyne is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and Aptiv PLC 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 Aptiv PLC are associated (or correlated) with Teradyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teradyne has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and Teradyne go up and down completely randomly.

Pair Corralation between Aptiv PLC and Teradyne

Given the investment horizon of 90 days Aptiv PLC is expected to under-perform the Teradyne. But the stock apears to be less risky and, when comparing its historical volatility, Aptiv PLC is 1.08 times less risky than Teradyne. The stock trades about -0.03 of its potential returns per unit of risk. The Teradyne is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,661  in Teradyne on September 20, 2024 and sell it today you would earn a total of  4,140  from holding Teradyne or generate 47.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Aptiv PLC  vs.  Teradyne

 Performance 
       Timeline  
Aptiv PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aptiv PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.
Teradyne 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Teradyne has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Teradyne is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Aptiv PLC and Teradyne Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aptiv PLC and Teradyne

The main advantage of trading using opposite Aptiv PLC and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aptiv PLC position performs unexpectedly, Teradyne 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 Teradyne will offset losses from the drop in Teradyne's long position.
The idea behind Aptiv PLC and Teradyne 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 Stocks Directory module to find actively traded stocks across global markets.

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