Correlation Between Teradyne and Canaan

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

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

Diversification Opportunities for Teradyne and Canaan

0.41

Correlation Coefficient

Teradyne  Canaan

Very weak diversification

The 3 months correlation between Teradyne and Canaan is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Canaan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaan 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 Canaan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canaan Inc has no effect on the direction of Teradyne i.e., Teradyne and Canaan go up and down completely randomly.

Pair Corralation between Teradyne and Canaan

Considering the 90-day investment horizon Teradyne is expected to generate 2.78 times less return on investment than Canaan. But when comparing it to its historical volatility, Teradyne is 2.91 times less risky than Canaan. It trades about 0.02 of its potential returns per unit of risk. Canaan Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  280.00  in Canaan Inc on November 19, 2024 and sell it today you would lose (101.00) from holding Canaan Inc or give up 36.07% of portfolio value over 90 days.

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

Teradyne  vs.  Canaan Inc

Teradyne

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Teradyne may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Canaan Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canaan Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Canaan displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teradyne and Canaan

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

The idea behind Teradyne and Canaan 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.