Correlation Between Trimble and Teledyne Technologies

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

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

Diversification Opportunities for Trimble and Teledyne Technologies

0.56

Correlation Coefficient

Trimble  Teledyne Technologies

Very weak diversification

The 3 months correlation between Trimble and Teledyne is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Trimble and Teledyne Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teledyne Technologies and Trimble 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 Trimble 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 Trimble i.e., Trimble and Teledyne Technologies go up and down completely randomly.

Pair Corralation between Trimble and Teledyne Technologies

Assuming the 90 days horizon Trimble is expected to under-perform the Teledyne Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Trimble is 1.05 times less risky than Teledyne Technologies. The stock trades about 0.0 of its potential returns per unit of risk. The Teledyne Technologies Incorporated is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  45,540  in Teledyne Technologies Incorporated on December 2, 2024 and sell it today you would earn a total of  3,660  from holding Teledyne Technologies Incorporated or generate 8.04% return on investment over 90 days.

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

Trimble  vs.  Teledyne Technologies Incorpor

Trimble

Risk-Adjusted Performance

Very Weak

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

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 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Teledyne Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Trimble and Teledyne Technologies

The main advantage of trading using opposite Trimble and Teledyne Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trimble 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 Trimble 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.