Correlation Between Keyence and Teledyne Technologies

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

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

Diversification Opportunities for Keyence and Teledyne Technologies

-0.13

Correlation Coefficient

Keyence  Teledyne Technologies

Good diversification

The 3 months correlation between Keyence and Teledyne is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Keyence and Teledyne Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teledyne Technologies and Keyence 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 Keyence 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 Keyence i.e., Keyence and Teledyne Technologies go up and down completely randomly.

Pair Corralation between Keyence and Teledyne Technologies

Assuming the 90 days horizon Keyence is expected to generate 1.44 times more return on investment than Teledyne Technologies. However, Keyence is 1.44 times more volatile than Teledyne Technologies Incorporated. It trades about 0.07 of its potential returns per unit of risk. Teledyne Technologies Incorporated is currently generating about 0.08 per unit of risk. If you would invest  39,060  in Keyence on October 24, 2024 and sell it today you would earn a total of  2,320  from holding Keyence or generate 5.94% return on investment over 90 days.

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

Keyence  vs.  Teledyne Technologies Incorpor

Keyence

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Keyence are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Keyence may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Teledyne Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Teledyne Technologies Incorporated are ranked lower than 6 (%) 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 Keyence and Teledyne Technologies

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

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..