Correlation Between Equinix and TERADYNE

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

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

Diversification Opportunities for Equinix and TERADYNE

-0.31

Correlation Coefficient

Equinix  TERADYNE

Very good diversification

The 3 months correlation between Equinix and TERADYNE is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Equinix and TERADYNE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TERADYNE and Equinix 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 Equinix 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 Equinix i.e., Equinix and TERADYNE go up and down completely randomly.

Pair Corralation between Equinix and TERADYNE

Assuming the 90 days trading horizon Equinix is expected to generate 0.51 times more return on investment than TERADYNE. However, Equinix is 1.94 times less risky than TERADYNE. It trades about 0.14 of its potential returns per unit of risk. TERADYNE is currently generating about 0.03 per unit of risk. If you would invest  77,910  in Equinix on September 23, 2024 and sell it today you would earn a total of  10,990  from holding Equinix or generate 14.11% return on investment over 90 days.

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

Equinix  vs.  TERADYNE

Equinix

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Equinix reported solid returns over the last few months and may actually be approaching a breakup point.

TERADYNE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TERADYNE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, TERADYNE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Equinix and TERADYNE

The main advantage of trading using opposite Equinix and TERADYNE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinix 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 Equinix 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.