Correlation Between EuropaCorp and Teledyne Technologies

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

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

Diversification Opportunities for EuropaCorp and Teledyne Technologies

0.17

Correlation Coefficient

EuropaCorp  Teledyne Technologies

Average diversification

The 3 months correlation between EuropaCorp and Teledyne is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding EuropaCorp and Teledyne Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teledyne Technologies and EuropaCorp 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 EuropaCorp are associated (or correlated) with Teledyne Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teledyne Technologies has no effect on the direction of EuropaCorp i.e., EuropaCorp and Teledyne Technologies go up and down completely randomly.

Pair Corralation between EuropaCorp and Teledyne Technologies

Assuming the 90 days horizon EuropaCorp is expected to generate 4.24 times more return on investment than Teledyne Technologies. However, EuropaCorp is 4.24 times more volatile than Teledyne Technologies Incorporated. It trades about 0.12 of its potential returns per unit of risk. Teledyne Technologies Incorporated is currently generating about 0.04 per unit of risk. If you would invest  31.00  in EuropaCorp on December 24, 2024 and sell it today you would earn a total of  13.00  from holding EuropaCorp or generate 41.94% return on investment over 90 days.

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

EuropaCorp  vs.  Teledyne Technologies Incorpor

EuropaCorp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EuropaCorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EuropaCorp reported solid returns over the last few months and may actually be approaching a breakup point.

Teledyne Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Teledyne Technologies Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Teledyne Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with EuropaCorp and Teledyne Technologies

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

The idea behind EuropaCorp and Teledyne Technologies Incorporated 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.

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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 CEOs Directory module to screen CEOs from public companies around the world.