Correlation Between Lasertec and Teradyne

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

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

Diversification Opportunities for Lasertec and Teradyne

0.73

Correlation Coefficient

Lasertec  Teradyne

Poor diversification

The 3 months correlation between Lasertec and Teradyne is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lasertec and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and Lasertec 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 Lasertec 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 Lasertec i.e., Lasertec and Teradyne go up and down completely randomly.

Pair Corralation between Lasertec and Teradyne

Assuming the 90 days horizon Lasertec is expected to generate 1.78 times more return on investment than Teradyne. However, Lasertec is 1.78 times more volatile than Teradyne. It trades about 0.04 of its potential returns per unit of risk. Teradyne is currently generating about 0.05 per unit of risk. If you would invest  8,225  in Lasertec on September 18, 2024 and sell it today you would earn a total of  3,680  from holding Lasertec or generate 44.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Lasertec  vs.  Teradyne

Lasertec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lasertec has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing 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 Lasertec and Teradyne

The main advantage of trading using opposite Lasertec and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lasertec 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 Lasertec 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.