Correlation Between Advantest and Teradyne

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

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

Diversification Opportunities for Advantest and Teradyne

-0.8

Correlation Coefficient

Advantest  Teradyne

Pay attention - limited upside

The 3 months correlation between Advantest and Teradyne is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Advantest and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and Advantest 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 Advantest 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 Advantest i.e., Advantest and Teradyne go up and down completely randomly.

Pair Corralation between Advantest and Teradyne

Assuming the 90 days horizon Advantest is expected to generate 1.14 times more return on investment than Teradyne. However, Advantest is 1.14 times more volatile than Teradyne. It trades about 0.21 of its potential returns per unit of risk. Teradyne is currently generating about 0.02 per unit of risk. If you would invest  4,347  in Advantest on September 18, 2024 and sell it today you would earn a total of  1,903  from holding Advantest or generate 43.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Advantest  vs.  Teradyne

Advantest

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advantest are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Advantest reported solid returns over the last few months and may actually be approaching a breakup point.

Teradyne

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Teradyne is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Advantest and Teradyne

The main advantage of trading using opposite Advantest and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advantest 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 Advantest 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.