Correlation Between Teradyne and Arm Holdings
Can any of the company-specific risk be diversified away by investing in both Teradyne and Arm Holdings 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 Teradyne and Arm Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradyne and Arm Holdings plc, you can compare the effects of market volatilities on Teradyne and Arm Holdings 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 Teradyne with a short position of Arm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradyne and Arm Holdings.
Diversification Opportunities for Teradyne and Arm Holdings
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Teradyne and Arm is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc and Teradyne 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 Teradyne are associated (or correlated) with Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of Teradyne i.e., Teradyne and Arm Holdings go up and down completely randomly.
Pair Corralation between Teradyne and Arm Holdings
Considering the 90-day investment horizon Teradyne is expected to generate 7.99 times less return on investment than Arm Holdings. But when comparing it to its historical volatility, Teradyne is 2.1 times less risky than Arm Holdings. It trades about 0.02 of its potential returns per unit of risk. Arm Holdings plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 6,359 in Arm Holdings plc on November 2, 2024 and sell it today you would earn a total of 8,964 from holding Arm Holdings plc or generate 140.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 70.24% |
| Values | Daily Returns |
Teradyne vs. Arm Holdings plc
Performance |
| Timeline |
| Teradyne |
| Arm Holdings plc |
Teradyne and Arm Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teradyne and Arm Holdings
The main advantage of trading using opposite Teradyne and Arm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradyne position performs unexpectedly, Arm Holdings 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 Arm Holdings will offset losses from the drop in Arm Holdings' long position.| Teradyne vs. IPG Photonics | Teradyne vs. Ultra Clean Holdings | Teradyne vs. Onto Innovation | Teradyne vs. Cohu Inc |
| Arm Holdings vs. BioNTech SE | Arm Holdings vs. Kuya Silver | Arm Holdings vs. Nicola Mining | Arm Holdings vs. Tarsus Pharmaceuticals |
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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