Correlation Between Teradyne and Magna International
Can any of the company-specific risk be diversified away by investing in both Teradyne and Magna International 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 Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradyne and Magna International, you can compare the effects of market volatilities on Teradyne and Magna International 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 Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradyne and Magna International.
Diversification Opportunities for Teradyne and Magna International
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Teradyne and Magna is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of Teradyne i.e., Teradyne and Magna International go up and down completely randomly.
Pair Corralation between Teradyne and Magna International
Considering the 90-day investment horizon Teradyne is expected to generate 1.19 times more return on investment than Magna International. However, Teradyne is 1.19 times more volatile than Magna International. It trades about 0.04 of its potential returns per unit of risk. Magna International is currently generating about -0.01 per unit of risk. If you would invest 8,661 in Teradyne on September 20, 2024 and sell it today you would earn a total of 4,140 from holding Teradyne or generate 47.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teradyne vs. Magna International
Performance |
| Timeline |
| Teradyne |
| Magna International |
Teradyne and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teradyne and Magna International
The main advantage of trading using opposite Teradyne and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradyne position performs unexpectedly, Magna International 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 Magna International will offset losses from the drop in Magna International's long position.The idea behind Teradyne and Magna International 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.| 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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