Correlation Between Hon Hai and Teradyne

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

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

Diversification Opportunities for Hon Hai and Teradyne

-0.55

Correlation Coefficient

Hon Hai  Teradyne

Excellent diversification

The 3 months correlation between Hon and Teradyne is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and Hon Hai 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 Hon Hai Precision 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 Hon Hai i.e., Hon Hai and Teradyne go up and down completely randomly.

Pair Corralation between Hon Hai and Teradyne

Assuming the 90 days horizon Hon Hai Precision is expected to under-perform the Teradyne. But the pink sheet apears to be less risky and, when comparing its historical volatility, Hon Hai Precision is 1.16 times less risky than Teradyne. The pink sheet trades about -0.29 of its potential returns per unit of risk. The Teradyne is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  11,851  in Teradyne on October 7, 2024 and sell it today you would earn a total of  1,209  from holding Teradyne or generate 10.2% return on investment over 90 days.

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

Hon Hai Precision  vs.  Teradyne

Hon Hai Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hon Hai Precision has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 Hon Hai and Teradyne

The main advantage of trading using opposite Hon Hai and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai 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 Hon Hai Precision 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.