Correlation Between Teradyne and CVD Equipment
Can any of the company-specific risk be diversified away by investing in both Teradyne and CVD Equipment 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 CVD Equipment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradyne and CVD Equipment, you can compare the effects of market volatilities on Teradyne and CVD Equipment 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 CVD Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradyne and CVD Equipment.
Diversification Opportunities for Teradyne and CVD Equipment
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Teradyne and CVD is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and CVD Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVD Equipment 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 CVD Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVD Equipment has no effect on the direction of Teradyne i.e., Teradyne and CVD Equipment go up and down completely randomly.
Pair Corralation between Teradyne and CVD Equipment
Considering the 90-day investment horizon Teradyne is expected to generate 0.56 times more return on investment than CVD Equipment. However, Teradyne is 1.78 times less risky than CVD Equipment. It trades about -0.38 of its potential returns per unit of risk. CVD Equipment is currently generating about -0.26 per unit of risk. If you would invest 14,000 in Teradyne on November 5, 2024 and sell it today you would lose (2,421) from holding Teradyne or give up 17.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teradyne vs. CVD Equipment
Performance |
| Timeline |
| Teradyne |
| CVD Equipment |
Teradyne and CVD Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teradyne and CVD Equipment
The main advantage of trading using opposite Teradyne and CVD Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradyne position performs unexpectedly, CVD Equipment 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 CVD Equipment will offset losses from the drop in CVD Equipment's long position.| Teradyne vs. IPG Photonics | Teradyne vs. Ultra Clean Holdings | Teradyne vs. Onto Innovation | Teradyne vs. Cohu Inc |
| CVD Equipment vs. Standex International | CVD Equipment vs. Intevac | CVD Equipment vs. Thermon Group Holdings | CVD Equipment vs. Enpro Industries |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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