Correlation Between ASML Holding and Teradyne
Can any of the company-specific risk be diversified away by investing in both ASML Holding 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 ASML Holding and Teradyne into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASML Holding NV and Teradyne, you can compare the effects of market volatilities on ASML Holding 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 ASML Holding with a short position of Teradyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASML Holding and Teradyne.
Diversification Opportunities for ASML Holding and Teradyne
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ASML and Teradyne is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and ASML Holding 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 ASML Holding NV 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 ASML Holding i.e., ASML Holding and Teradyne go up and down completely randomly.
Pair Corralation between ASML Holding and Teradyne
Given the investment horizon of 90 days ASML Holding NV is expected to under-perform the Teradyne. But the stock apears to be less risky and, when comparing its historical volatility, ASML Holding NV is 1.04 times less risky than Teradyne. The stock trades about -0.11 of its potential returns per unit of risk. The Teradyne is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 11,133 in Teradyne on August 27, 2024 and sell it today you would lose (312.00) from holding Teradyne or give up 2.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASML Holding NV vs. Teradyne
Performance |
| Timeline |
| ASML Holding NV |
| Teradyne |
ASML Holding and Teradyne Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASML Holding and Teradyne
The main advantage of trading using opposite ASML Holding and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASML Holding 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.| ASML Holding vs. Applied Materials | ASML Holding vs. KLA Tencor | ASML Holding vs. Axcelis Technologies | ASML Holding vs. Teradyne |
| Teradyne vs. IPG Photonics | Teradyne vs. Ultra Clean Holdings | Teradyne vs. Onto Innovation | Teradyne vs. Cohu Inc |
Check out your portfolio center.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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