Correlation Between Teradyne and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Teradyne and Applied Materials 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 Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradyne and Applied Materials, you can compare the effects of market volatilities on Teradyne and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradyne and Applied Materials.
Diversification Opportunities for Teradyne and Applied Materials
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Teradyne and Applied is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Teradyne i.e., Teradyne and Applied Materials go up and down completely randomly.
Pair Corralation between Teradyne and Applied Materials
Assuming the 90 days horizon Teradyne is expected to generate 1.34 times less return on investment than Applied Materials. In addition to that, Teradyne is 1.13 times more volatile than Applied Materials. It trades about 0.03 of its total potential returns per unit of risk. Applied Materials is currently generating about 0.04 per unit of volatility. If you would invest 12,763 in Applied Materials on August 29, 2024 and sell it today you would earn a total of 3,297 from holding Applied Materials or generate 25.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teradyne vs. Applied Materials
Performance |
| Timeline |
| Teradyne |
| Applied Materials |
Teradyne and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teradyne and Applied Materials
The main advantage of trading using opposite Teradyne and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradyne position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| Teradyne vs. Eidesvik Offshore ASA | Teradyne vs. UPDATE SOFTWARE | Teradyne vs. EIDESVIK OFFSHORE NK | Teradyne vs. Virtus Investment Partners |
| Applied Materials vs. Lam Research | Applied Materials vs. KLA Corporation | Applied Materials vs. Superior Plus Corp | Applied Materials vs. NMI Holdings |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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