Correlation Between Dow Jones and Teradyne
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Teradyne into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Teradyne, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Teradyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Teradyne.
Diversification Opportunities for Dow Jones and Teradyne
Excellent diversification
The 3 months correlation between Dow and Teradyne is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Teradyne go up and down completely randomly.
Pair Corralation between Dow Jones and Teradyne
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.22 times less return on investment than Teradyne. But when comparing it to its historical volatility, Dow Jones Industrial is 4.02 times less risky than Teradyne. It trades about 0.12 of its potential returns per unit of risk. Teradyne is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 9,195 in Teradyne on August 26, 2024 and sell it today you would earn a total of 1,626 from holding Teradyne or generate 17.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Teradyne
Performance |
| Timeline |
Dow Jones and Teradyne Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Teradyne
Pair trading matchups for Teradyne
Pair Trading with Dow Jones and Teradyne
The main advantage of trading using opposite Dow Jones and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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