Correlation Between Teradyne and BCE

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

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

Diversification Opportunities for Teradyne and BCE

0.57

Correlation Coefficient

Teradyne  BCE

Very weak diversification

The 3 months correlation between Teradyne and BCE is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc 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 BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc has no effect on the direction of Teradyne i.e., Teradyne and BCE go up and down completely randomly.

Pair Corralation between Teradyne and BCE

Considering the 90-day investment horizon Teradyne is expected to generate 1.81 times more return on investment than BCE. However, Teradyne is 1.81 times more volatile than BCE Inc. It trades about 0.42 of its potential returns per unit of risk. BCE Inc is currently generating about -0.49 per unit of risk. 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	Weak
Accuracy	100.0%
Values	Daily Returns

Teradyne  vs.  BCE Inc

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.

BCE Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Teradyne and BCE

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

The idea behind Teradyne and BCE Inc 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.