Correlation Between Teradyne and Ambarella

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

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

Diversification Opportunities for Teradyne and Ambarella

-0.49

Correlation Coefficient

Teradyne  Ambarella

Very good diversification

The 3 months correlation between Teradyne and Ambarella is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Ambarella in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambarella and Teradyne 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 Teradyne are associated (or correlated) with Ambarella. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambarella has no effect on the direction of Teradyne i.e., Teradyne and Ambarella go up and down completely randomly.

Pair Corralation between Teradyne and Ambarella

Considering the 90-day investment horizon Teradyne is expected to under-perform the Ambarella. In addition to that, Teradyne is 1.02 times more volatile than Ambarella. It trades about -0.12 of its total potential returns per unit of risk. Ambarella is currently generating about 0.13 per unit of volatility. If you would invest  5,970  in Ambarella on August 30, 2024 and sell it today you would earn a total of  1,274  from holding Ambarella or generate 21.34% return on investment over 90 days.

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

Teradyne  vs.  Ambarella

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Ambarella

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ambarella are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Ambarella sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teradyne and Ambarella

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

The idea behind Teradyne and Ambarella 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.