Correlation Between Sphere Entertainment and Teradyne

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

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

Diversification Opportunities for Sphere Entertainment and Teradyne

0.26

Correlation Coefficient

Sphere Entertainment  Teradyne

Modest diversification

The 3 months correlation between Sphere and Teradyne is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and Sphere 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 Sphere Entertainment 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 Sphere Entertainment i.e., Sphere Entertainment and Teradyne go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Teradyne

Given the investment horizon of 90 days Sphere Entertainment Co is expected to under-perform the Teradyne. But the stock apears to be less risky and, when comparing its historical volatility, Sphere Entertainment Co is 1.05 times less risky than Teradyne. The stock trades about -0.29 of its potential returns per unit of risk. The Teradyne is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  10,347  in Teradyne on September 21, 2024 and sell it today you would earn a total of  2,172  from holding Teradyne or generate 20.99% return on investment over 90 days.

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

Sphere Entertainment Co  vs.  Teradyne

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail 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. Even with relatively invariable technical and fundamental indicators, Teradyne is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sphere Entertainment and Teradyne

The main advantage of trading using opposite Sphere Entertainment and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sphere 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 Sphere Entertainment Co 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.