Correlation Between Keyence and Teledyne Technologies
Can any of the company-specific risk be diversified away by investing in both Keyence and Teledyne Technologies 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 Keyence and Teledyne Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Keyence and Teledyne Technologies Incorporated, you can compare the effects of market volatilities on Keyence and Teledyne Technologies 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 Keyence with a short position of Teledyne Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keyence and Teledyne Technologies.
Diversification Opportunities for Keyence and Teledyne Technologies
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Keyence and Teledyne is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Keyence and Teledyne Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teledyne Technologies and Keyence 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 Keyence are associated (or correlated) with Teledyne Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teledyne Technologies has no effect on the direction of Keyence i.e., Keyence and Teledyne Technologies go up and down completely randomly.
Pair Corralation between Keyence and Teledyne Technologies
Assuming the 90 days horizon Keyence is expected to generate 4.61 times more return on investment than Teledyne Technologies. However, Keyence is 4.61 times more volatile than Teledyne Technologies Incorporated. It trades about 0.08 of its potential returns per unit of risk. Teledyne Technologies Incorporated is currently generating about 0.15 per unit of risk. If you would invest 26,282 in Keyence on September 5, 2024 and sell it today you would earn a total of 15,638 from holding Keyence or generate 59.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Keyence vs. Teledyne Technologies Incorpor
Performance |
| Timeline |
| Keyence |
| Teledyne Technologies |
Keyence and Teledyne Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Keyence and Teledyne Technologies
The main advantage of trading using opposite Keyence and Teledyne Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keyence position performs unexpectedly, Teledyne Technologies 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 Teledyne Technologies will offset losses from the drop in Teledyne Technologies' long position.The idea behind Keyence and Teledyne Technologies Incorporated 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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