Correlation Between Monolithic Power and Teradyne
Can any of the company-specific risk be diversified away by investing in both Monolithic Power 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 Monolithic Power and Teradyne into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Monolithic Power Systems and Teradyne, you can compare the effects of market volatilities on Monolithic Power 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 Monolithic Power with a short position of Teradyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monolithic Power and Teradyne.
Diversification Opportunities for Monolithic Power and Teradyne
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monolithic and Teradyne is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Monolithic Power Systems and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and Monolithic Power 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 Monolithic Power Systems 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 Monolithic Power i.e., Monolithic Power and Teradyne go up and down completely randomly.
Pair Corralation between Monolithic Power and Teradyne
Given the investment horizon of 90 days Monolithic Power is expected to generate 2.43 times less return on investment than Teradyne. In addition to that, Monolithic Power is 1.22 times more volatile than Teradyne. It trades about 0.01 of its total potential returns per unit of risk. Teradyne is currently generating about 0.04 per unit of volatility. If you would invest 10,545 in Teradyne on September 14, 2024 and sell it today you would earn a total of 1,814 from holding Teradyne or generate 17.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monolithic Power Systems vs. Teradyne
Performance |
| Timeline |
| Monolithic Power Systems |
| Teradyne |
Monolithic Power and Teradyne Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monolithic Power and Teradyne
The main advantage of trading using opposite Monolithic Power and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monolithic Power 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.| Monolithic Power vs. ON Semiconductor | Monolithic Power vs. Globalfoundries | Monolithic Power vs. Wisekey International Holding | Monolithic Power vs. Nano Labs |
| 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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