Correlation Between Analog Devices, and Teladoc Health

Can any of the company-specific risk be diversified away by investing in both Analog Devices, and Teladoc Health 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 Analog Devices, and Teladoc Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Analog Devices, and Teladoc Health, you can compare the effects of market volatilities on Analog Devices, and Teladoc Health 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 Analog Devices, with a short position of Teladoc Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices, and Teladoc Health.

Diversification Opportunities for Analog Devices, and Teladoc Health

0.46

Correlation Coefficient

Analog Devices,  Teladoc Health

Very weak diversification

The 3 months correlation between Analog and Teladoc is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices, and Teladoc Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teladoc Health and Analog Devices, 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 Analog Devices, are associated (or correlated) with Teladoc Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teladoc Health has no effect on the direction of Analog Devices, i.e., Analog Devices, and Teladoc Health go up and down completely randomly.

Pair Corralation between Analog Devices, and Teladoc Health

Assuming the 90 days trading horizon Analog Devices, is expected to generate 0.42 times more return on investment than Teladoc Health. However, Analog Devices, is 2.37 times less risky than Teladoc Health. It trades about 0.09 of its potential returns per unit of risk. Teladoc Health is currently generating about -0.04 per unit of risk. If you would invest  45,840  in Analog Devices, on October 9, 2024 and sell it today you would earn a total of  19,533  from holding Analog Devices, or generate 42.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

Analog Devices,  vs.  Teladoc Health

Analog Devices,

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices, are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Analog Devices, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Teladoc Health

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Teladoc Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Teladoc Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Analog Devices, and Teladoc Health

The main advantage of trading using opposite Analog Devices, and Teladoc Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices, position performs unexpectedly, Teladoc Health 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 Teladoc Health will offset losses from the drop in Teladoc Health's long position.

The idea behind Analog Devices, and Teladoc Health 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.