Correlation Between Onto Innovation and Teradyne

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

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

Diversification Opportunities for Onto Innovation and Teradyne

0.78

Correlation Coefficient

Onto Innovation  Teradyne

Poor diversification

The 3 months correlation between Onto and Teradyne is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Onto Innovation and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and Onto Innovation 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 Onto Innovation 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 Onto Innovation i.e., Onto Innovation and Teradyne go up and down completely randomly.

Pair Corralation between Onto Innovation and Teradyne

Given the investment horizon of 90 days Onto Innovation is expected to generate 1.22 times more return on investment than Teradyne. However, Onto Innovation is 1.22 times more volatile than Teradyne. It trades about -0.11 of its potential returns per unit of risk. Teradyne is currently generating about -0.17 per unit of risk. If you would invest  16,780  in Onto Innovation on December 29, 2024 and sell it today you would lose (4,573) from holding Onto Innovation or give up 27.25% of portfolio value over 90 days.

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

Onto Innovation  vs.  Teradyne

Onto Innovation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Onto Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Teradyne

Risk-Adjusted Performance

Very Weak

Over the last 90 days Teradyne has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Onto Innovation and Teradyne

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