Correlation Between Teradyne and KLA
Can any of the company-specific risk be diversified away by investing in both Teradyne and KLA 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 KLA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradyne and KLA Corporation, you can compare the effects of market volatilities on Teradyne and KLA 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 KLA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradyne and KLA.
Diversification Opportunities for Teradyne and KLA
Poor diversification
The 3 months correlation between Teradyne and KLA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and KLA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Corporation 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 KLA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Corporation has no effect on the direction of Teradyne i.e., Teradyne and KLA go up and down completely randomly.
Pair Corralation between Teradyne and KLA
Assuming the 90 days horizon Teradyne is expected to generate 1.97 times less return on investment than KLA. In addition to that, Teradyne is 1.03 times more volatile than KLA Corporation. It trades about 0.03 of its total potential returns per unit of risk. KLA Corporation is currently generating about 0.06 per unit of volatility. If you would invest 35,798 in KLA Corporation on August 28, 2024 and sell it today you would earn a total of 25,902 from holding KLA Corporation or generate 72.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teradyne vs. KLA Corp.
Performance |
| Timeline |
| Teradyne |
| KLA Corporation |
Teradyne and KLA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teradyne and KLA
The main advantage of trading using opposite Teradyne and KLA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradyne position performs unexpectedly, KLA 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 KLA will offset losses from the drop in KLA's long position.| Teradyne vs. ASML HOLDING NY | Teradyne vs. Applied Materials | Teradyne vs. Superior Plus Corp | Teradyne vs. NMI Holdings |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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