Correlation Between Teradyne and Li Auto
Can any of the company-specific risk be diversified away by investing in both Teradyne and Li Auto 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 Li Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradyne and Li Auto, you can compare the effects of market volatilities on Teradyne and Li Auto 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 Li Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradyne and Li Auto.
Diversification Opportunities for Teradyne and Li Auto
Average diversification
The 3 months correlation between Teradyne and Li Auto is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto 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 Li Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Auto has no effect on the direction of Teradyne i.e., Teradyne and Li Auto go up and down completely randomly.
Pair Corralation between Teradyne and Li Auto
Considering the 90-day investment horizon Teradyne is expected to generate 0.65 times more return on investment than Li Auto. However, Teradyne is 1.53 times less risky than Li Auto. It trades about 0.04 of its potential returns per unit of risk. Li Auto is currently generating about 0.0 per unit of risk. 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 Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teradyne vs. Li Auto
Performance |
| Timeline |
| Teradyne |
| Li Auto |
Teradyne and Li Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teradyne and Li Auto
The main advantage of trading using opposite Teradyne and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradyne position performs unexpectedly, Li Auto 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 Li Auto will offset losses from the drop in Li Auto's long position.The idea behind Teradyne and Li Auto 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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