Correlation Between Teradyne and Clearfield

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

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

Diversification Opportunities for Teradyne and Clearfield

0.62

Correlation Coefficient

Teradyne  Clearfield

Poor diversification

The 3 months correlation between Teradyne and Clearfield is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Clearfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearfield 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 Clearfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearfield has no effect on the direction of Teradyne i.e., Teradyne and Clearfield go up and down completely randomly.

Pair Corralation between Teradyne and Clearfield

Considering the 90-day investment horizon Teradyne is expected to under-perform the Clearfield. In addition to that, Teradyne is 1.15 times more volatile than Clearfield. It trades about -0.19 of its total potential returns per unit of risk. Clearfield is currently generating about -0.01 per unit of volatility. If you would invest  3,123  in Clearfield on December 30, 2024 and sell it today you would lose (130.00) from holding Clearfield or give up 4.16% of portfolio value over 90 days.

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

Teradyne  vs.  Clearfield

Teradyne

Risk-Adjusted Performance

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 April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Clearfield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clearfield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Clearfield is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Teradyne and Clearfield

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

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