Correlation Between Magna International and Teradyne
Can any of the company-specific risk be diversified away by investing in both Magna International 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 Magna International and Teradyne into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Teradyne, you can compare the effects of market volatilities on Magna International 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 Magna International with a short position of Teradyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Teradyne.
Diversification Opportunities for Magna International and Teradyne
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Magna and Teradyne is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and Magna International 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 Magna International 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 Magna International i.e., Magna International and Teradyne go up and down completely randomly.
Pair Corralation between Magna International and Teradyne
Considering the 90-day investment horizon Magna International is expected to under-perform the Teradyne. But the stock apears to be less risky and, when comparing its historical volatility, Magna International is 1.33 times less risky than Teradyne. The stock trades about 0.0 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 10,207 in Teradyne on September 19, 2024 and sell it today you would earn a total of 2,594 from holding Teradyne or generate 25.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. Teradyne
Performance |
| Timeline |
| Magna International |
| Teradyne |
Magna International and Teradyne Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Teradyne
The main advantage of trading using opposite Magna International and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International 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.| Magna International vs. Ford Motor | Magna International vs. General Motors | Magna International vs. Goodyear Tire Rubber | Magna International vs. Li Auto |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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