Correlation Between Badger Meter and Teledyne Technologies

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

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

Diversification Opportunities for Badger Meter and Teledyne Technologies

0.23

Correlation Coefficient

Badger Meter  Teledyne Technologies

Modest diversification

The 3 months correlation between Badger and Teledyne is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Badger Meter and Teledyne Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teledyne Technologies and Badger Meter 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 Badger Meter 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 Badger Meter i.e., Badger Meter and Teledyne Technologies go up and down completely randomly.

Pair Corralation between Badger Meter and Teledyne Technologies

Considering the 90-day investment horizon Badger Meter is expected to generate 1.8 times more return on investment than Teledyne Technologies. However, Badger Meter is 1.8 times more volatile than Teledyne Technologies Incorporated. It trades about -0.01 of its potential returns per unit of risk. Teledyne Technologies Incorporated is currently generating about -0.15 per unit of risk. If you would invest  21,682  in Badger Meter on September 29, 2024 and sell it today you would lose (137.00) from holding Badger Meter or give up 0.63% of portfolio value over 90 days.

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

Badger Meter  vs.  Teledyne Technologies Incorpor

Badger Meter

Risk-Adjusted Performance

0 of 100

Very Weak

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

Teledyne Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teledyne Technologies Incorporated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Teledyne Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Badger Meter and Teledyne Technologies

The main advantage of trading using opposite Badger Meter and Teledyne Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Badger Meter 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 Badger Meter 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.