Correlation Between Entegris and Teradyne
Can any of the company-specific risk be diversified away by investing in both Entegris 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 Entegris and Teradyne into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Entegris and Teradyne, you can compare the effects of market volatilities on Entegris 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 Entegris with a short position of Teradyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entegris and Teradyne.
Diversification Opportunities for Entegris and Teradyne
Poor diversification
The 3 months correlation between Entegris and Teradyne is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Entegris and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and Entegris 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 Entegris 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 Entegris i.e., Entegris and Teradyne go up and down completely randomly.
Pair Corralation between Entegris and Teradyne
Given the investment horizon of 90 days Entegris is expected to generate 1.05 times more return on investment than Teradyne. However, Entegris is 1.05 times more volatile than Teradyne. It trades about 0.04 of its potential returns per unit of risk. Teradyne is currently generating about 0.03 per unit of risk. If you would invest 7,835 in Entegris on August 27, 2024 and sell it today you would earn a total of 2,889 from holding Entegris or generate 36.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Entegris vs. Teradyne
Performance |
| Timeline |
| Entegris |
| Teradyne |
Entegris and Teradyne Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Entegris and Teradyne
The main advantage of trading using opposite Entegris and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entegris 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 Entegris 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.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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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