Correlation Between Beauty Health and Teradyne
Can any of the company-specific risk be diversified away by investing in both Beauty Health 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 Beauty Health and Teradyne into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beauty Health Co and Teradyne, you can compare the effects of market volatilities on Beauty Health 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 Beauty Health with a short position of Teradyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beauty Health and Teradyne.
Diversification Opportunities for Beauty Health and Teradyne
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Beauty and Teradyne is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Health Co and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and Beauty Health 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 Beauty Health Co 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 Beauty Health i.e., Beauty Health and Teradyne go up and down completely randomly.
Pair Corralation between Beauty Health and Teradyne
Given the investment horizon of 90 days Beauty Health Co is expected to generate 1.37 times more return on investment than Teradyne. However, Beauty Health is 1.37 times more volatile than Teradyne. It trades about -0.04 of its potential returns per unit of risk. Teradyne is currently generating about -0.18 per unit of risk. If you would invest 160.00 in Beauty Health Co on December 28, 2024 and sell it today you would lose (26.00) from holding Beauty Health Co or give up 16.25% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Beauty Health Co vs. Teradyne
Performance |
Timeline |
Beauty Health |
Teradyne |
Beauty Health and Teradyne Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Beauty Health and Teradyne
The main advantage of trading using opposite Beauty Health and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beauty Health 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.Beauty Health vs. Clear Secure | Beauty Health vs. GXO Logistics | Beauty Health vs. Doximity | Beauty Health vs. Figs Inc |
Teradyne vs. IPG Photonics | Teradyne vs. Ultra Clean Holdings | Teradyne vs. Onto Innovation | Teradyne vs. Cohu Inc |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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