Correlation Between Teradyne and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Teradyne and STMicroelectronics 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 STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradyne and STMicroelectronics NV ADR, you can compare the effects of market volatilities on Teradyne and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradyne and STMicroelectronics.
Diversification Opportunities for Teradyne and STMicroelectronics
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Teradyne and STMicroelectronics is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and STMicroelectronics NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics NV 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics NV ADR has no effect on the direction of Teradyne i.e., Teradyne and STMicroelectronics go up and down completely randomly.
Pair Corralation between Teradyne and STMicroelectronics
Considering the 90-day investment horizon Teradyne is expected to under-perform the STMicroelectronics. In addition to that, Teradyne is 1.17 times more volatile than STMicroelectronics NV ADR. It trades about -0.1 of its total potential returns per unit of risk. STMicroelectronics NV ADR is currently generating about -0.12 per unit of volatility. If you would invest 3,105 in STMicroelectronics NV ADR on August 29, 2024 and sell it today you would lose (548.00) from holding STMicroelectronics NV ADR or give up 17.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teradyne vs. STMicroelectronics NV ADR
Performance |
| Timeline |
| Teradyne |
| STMicroelectronics NV ADR |
Teradyne and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teradyne and STMicroelectronics
The main advantage of trading using opposite Teradyne and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradyne position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| Teradyne vs. IPG Photonics | Teradyne vs. Ultra Clean Holdings | Teradyne vs. Onto Innovation | Teradyne vs. Cohu Inc |
| STMicroelectronics vs. NXP Semiconductors NV | STMicroelectronics vs. Analog Devices | STMicroelectronics vs. ON Semiconductor | STMicroelectronics vs. Lattice Semiconductor |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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