Correlation Between Analog Devices and Teradyne

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

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

Diversification Opportunities for Analog Devices and Teradyne

0.62

Correlation Coefficient

Analog Devices  Teradyne

Poor diversification

The 3 months correlation between Analog and Teradyne is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne 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 Teradyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teradyne has no effect on the direction of Analog Devices i.e., Analog Devices and Teradyne go up and down completely randomly.

Pair Corralation between Analog Devices and Teradyne

Considering the 90-day investment horizon Analog Devices is expected to generate 0.73 times more return on investment than Teradyne. However, Analog Devices is 1.38 times less risky than Teradyne. It trades about 0.01 of its potential returns per unit of risk. Teradyne is currently generating about -0.06 per unit of risk. If you would invest  21,871  in Analog Devices on September 1, 2024 and sell it today you would lose (66.00) from holding Analog Devices or give up 0.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Analog Devices  vs.  Teradyne

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Teradyne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teradyne has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Analog Devices and Teradyne

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

The idea behind Analog Devices and Teradyne 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.