Correlation Between Teradyne and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both Teradyne and NMI Holdings 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 NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradyne and NMI Holdings, you can compare the effects of market volatilities on Teradyne and NMI Holdings 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 NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradyne and NMI Holdings.
Diversification Opportunities for Teradyne and NMI Holdings
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Teradyne and NMI is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings 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 NMI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMI Holdings has no effect on the direction of Teradyne i.e., Teradyne and NMI Holdings go up and down completely randomly.
Pair Corralation between Teradyne and NMI Holdings
Assuming the 90 days horizon Teradyne is expected to generate 1.83 times less return on investment than NMI Holdings. In addition to that, Teradyne is 1.78 times more volatile than NMI Holdings. It trades about 0.03 of its total potential returns per unit of risk. NMI Holdings is currently generating about 0.1 per unit of volatility. If you would invest 2,080 in NMI Holdings on August 26, 2024 and sell it today you would earn a total of 1,500 from holding NMI Holdings or generate 72.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teradyne vs. NMI Holdings
Performance |
| Timeline |
| Teradyne |
| NMI Holdings |
Teradyne and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teradyne and NMI Holdings
The main advantage of trading using opposite Teradyne and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradyne position performs unexpectedly, NMI Holdings 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 NMI Holdings will offset losses from the drop in NMI Holdings' long position.| Teradyne vs. ASML HOLDING NY | Teradyne vs. Applied Materials | Teradyne vs. Lam Research | Teradyne vs. Superior Plus Corp |
| NMI Holdings vs. USWE SPORTS AB | NMI Holdings vs. GungHo Online Entertainment | NMI Holdings vs. Ming Le Sports | NMI Holdings vs. DICKS Sporting Goods |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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