Correlation Between Teradyne and Nokia Corp

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Can any of the company-specific risk be diversified away by investing in both Teradyne and Nokia Corp 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 Nokia Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradyne and Nokia Corp ADR, you can compare the effects of market volatilities on Teradyne and Nokia Corp 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 Nokia Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradyne and Nokia Corp.

Diversification Opportunities for Teradyne and Nokia Corp

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between Teradyne and Nokia is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Nokia Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia Corp ADR 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 Nokia Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia Corp ADR has no effect on the direction of Teradyne i.e., Teradyne and Nokia Corp go up and down completely randomly.

Pair Corralation between Teradyne and Nokia Corp

Considering the 90-day investment horizon Teradyne is expected to generate 0.93 times more return on investment than Nokia Corp. However, Teradyne is 1.07 times less risky than Nokia Corp. It trades about -0.06 of its potential returns per unit of risk. Nokia Corp ADR is currently generating about -0.27 per unit of risk. If you would invest  11,175  in Teradyne on August 26, 2024 and sell it today you would lose (354.00) from holding Teradyne or give up 3.17% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Teradyne  vs.  Nokia Corp ADR

 Performance 
       Timeline  
Teradyne 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Teradyne has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.
Nokia Corp ADR 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Nokia Corp ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Nokia Corp is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Teradyne and Nokia Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Teradyne and Nokia Corp

The main advantage of trading using opposite Teradyne and Nokia Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradyne position performs unexpectedly, Nokia Corp 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 Nokia Corp will offset losses from the drop in Nokia Corp's long position.
The idea behind Teradyne and Nokia Corp ADR 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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