Correlation Between Teledyne Technologies and Novanta

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

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

Diversification Opportunities for Teledyne Technologies and Novanta

-0.24

Correlation Coefficient

Teledyne Technologies  Novanta

Very good diversification

The 3 months correlation between Teledyne and Novanta is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Teledyne Technologies Incorpor and Novanta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novanta and Teledyne Technologies 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 Teledyne Technologies Incorporated are associated (or correlated) with Novanta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novanta has no effect on the direction of Teledyne Technologies i.e., Teledyne Technologies and Novanta go up and down completely randomly.

Pair Corralation between Teledyne Technologies and Novanta

Considering the 90-day investment horizon Teledyne Technologies Incorporated is expected to generate 0.89 times more return on investment than Novanta. However, Teledyne Technologies Incorporated is 1.12 times less risky than Novanta. It trades about 0.08 of its potential returns per unit of risk. Novanta is currently generating about -0.16 per unit of risk. If you would invest  46,523  in Teledyne Technologies Incorporated on December 29, 2024 and sell it today you would earn a total of  3,029  from holding Teledyne Technologies Incorporated or generate 6.51% return on investment over 90 days.

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

Teledyne Technologies Incorpor  vs.  Novanta

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 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Teledyne Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Novanta

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Teledyne Technologies and Novanta

The main advantage of trading using opposite Teledyne Technologies and Novanta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teledyne Technologies position performs unexpectedly, Novanta 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 Novanta will offset losses from the drop in Novanta's long position.

The idea behind Teledyne Technologies Incorporated and Novanta 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.