Correlation Between Teradyne and Modine Manufacturing
Can any of the company-specific risk be diversified away by investing in both Teradyne and Modine Manufacturing 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 Modine Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradyne and Modine Manufacturing, you can compare the effects of market volatilities on Teradyne and Modine Manufacturing 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 Modine Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradyne and Modine Manufacturing.
Diversification Opportunities for Teradyne and Modine Manufacturing
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Teradyne and Modine is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing 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 Modine Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modine Manufacturing has no effect on the direction of Teradyne i.e., Teradyne and Modine Manufacturing go up and down completely randomly.
Pair Corralation between Teradyne and Modine Manufacturing
Considering the 90-day investment horizon Teradyne is expected to generate 4.04 times less return on investment than Modine Manufacturing. But when comparing it to its historical volatility, Teradyne is 1.47 times less risky than Modine Manufacturing. It trades about 0.04 of its potential returns per unit of risk. Modine Manufacturing is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,986 in Modine Manufacturing on September 20, 2024 and sell it today you would earn a total of 10,781 from holding Modine Manufacturing or generate 542.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teradyne vs. Modine Manufacturing
Performance |
| Timeline |
| Teradyne |
| Modine Manufacturing |
Teradyne and Modine Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teradyne and Modine Manufacturing
The main advantage of trading using opposite Teradyne and Modine Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradyne position performs unexpectedly, Modine Manufacturing 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 Modine Manufacturing will offset losses from the drop in Modine Manufacturing's long position.The idea behind Teradyne and Modine Manufacturing 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.| Modine Manufacturing vs. Ford Motor | Modine Manufacturing vs. General Motors | Modine Manufacturing vs. Goodyear Tire Rubber | Modine Manufacturing 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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