Correlation Between Universal Entertainment and Teradyne

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

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

Diversification Opportunities for Universal Entertainment and Teradyne

0.69

Correlation Coefficient

Universal Entertainment  Teradyne

Poor diversification

The 3 months correlation between Universal and Teradyne is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Universal Entertainment and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and Universal Entertainment 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 Universal Entertainment 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 Universal Entertainment i.e., Universal Entertainment and Teradyne go up and down completely randomly.

Pair Corralation between Universal Entertainment and Teradyne

Assuming the 90 days trading horizon Universal Entertainment is expected to under-perform the Teradyne. In addition to that, Universal Entertainment is 1.31 times more volatile than Teradyne. It trades about -0.11 of its total potential returns per unit of risk. Teradyne is currently generating about 0.0 per unit of volatility. If you would invest  11,282  in Teradyne on September 5, 2024 and sell it today you would lose (292.00) from holding Teradyne or give up 2.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Universal Entertainment  vs.  Teradyne

Universal Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Teradyne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teradyne has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Teradyne is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Universal Entertainment and Teradyne

The main advantage of trading using opposite Universal Entertainment and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Entertainment 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 Universal Entertainment 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.