Correlation Between Teradyne and Dennys Corp

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

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

Diversification Opportunities for Teradyne and Dennys Corp

-0.28

Correlation Coefficient

Teradyne  Dennys Corp

Very good diversification

The 3 months correlation between Teradyne and Dennys is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Dennys Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dennys Corp 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 Dennys Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dennys Corp has no effect on the direction of Teradyne i.e., Teradyne and Dennys Corp go up and down completely randomly.

Pair Corralation between Teradyne and Dennys Corp

Considering the 90-day investment horizon Teradyne is expected to generate 3.19 times less return on investment than Dennys Corp. But when comparing it to its historical volatility, Teradyne is 1.37 times less risky than Dennys Corp. It trades about 0.03 of its potential returns per unit of risk. Dennys Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  550.00  in Dennys Corp on September 23, 2024 and sell it today you would earn a total of  37.00  from holding Dennys Corp or generate 6.73% return on investment over 90 days.

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

Teradyne  vs.  Dennys Corp

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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Dennys Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dennys Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dennys Corp is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Teradyne and Dennys Corp

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

The idea behind Teradyne and Dennys Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.