Correlation Between Novanta and Teledyne Technologies

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

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

Diversification Opportunities for Novanta and Teledyne Technologies

-0.24

Correlation Coefficient

Novanta  Teledyne Technologies

Very good diversification

The 3 months correlation between Novanta and Teledyne is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Novanta and Teledyne Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teledyne Technologies and Novanta 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 Novanta 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 Novanta i.e., Novanta and Teledyne Technologies go up and down completely randomly.

Pair Corralation between Novanta and Teledyne Technologies

Given the investment horizon of 90 days Novanta is expected to under-perform the Teledyne Technologies. In addition to that, Novanta is 1.12 times more volatile than Teledyne Technologies Incorporated. It trades about -0.16 of its total potential returns per unit of risk. Teledyne Technologies Incorporated is currently generating about 0.08 per unit of volatility. If you would invest  46,523  in Teledyne Technologies Incorporated on December 29, 2024 and sell it today you would earn a total of  3,029  from holding Teledyne Technologies Incorporated or generate 6.51% return on investment over 90 days.

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

Novanta  vs.  Teledyne Technologies Incorpor

Novanta

Risk-Adjusted Performance

Very Weak

Over the last 90 days Novanta has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Teledyne Technologies

Risk-Adjusted Performance

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. In spite of fairly uncertain fundamental indicators, Teledyne Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Novanta and Teledyne Technologies

The main advantage of trading using opposite Novanta and Teledyne Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novanta 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 Novanta 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 Global Correlations module to find global opportunities by holding instruments from different markets.