Correlation Between Teradyne and Radcom

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

Diversification Opportunities for Teradyne and Radcom

-0.62
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Teradyne and Radcom is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom 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 Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of Teradyne i.e., Teradyne and Radcom go up and down completely randomly.

Pair Corralation between Teradyne and Radcom

Considering the 90-day investment horizon Teradyne is expected to under-perform the Radcom. But the stock apears to be less risky and, when comparing its historical volatility, Teradyne is 1.91 times less risky than Radcom. The stock trades about -0.09 of its potential returns per unit of risk. The Radcom is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,003  in Radcom on August 30, 2024 and sell it today you would earn a total of  182.00  from holding Radcom or generate 18.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Teradyne  vs.  Radcom

 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.
Radcom 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Teradyne and Radcom Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Teradyne and Radcom

The main advantage of trading using opposite Teradyne and Radcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradyne position performs unexpectedly, Radcom 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 Radcom will offset losses from the drop in Radcom's long position.
The idea behind Teradyne and Radcom 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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