Correlation Between Teradyne and Disco Corp

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

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

Diversification Opportunities for Teradyne and Disco Corp

0.04

Correlation Coefficient

Teradyne  Disco Corp

Significant diversification

The 3 months correlation between Teradyne and Disco is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Disco Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Disco Corp ADR 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 Disco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Disco Corp ADR has no effect on the direction of Teradyne i.e., Teradyne and Disco Corp go up and down completely randomly.

Pair Corralation between Teradyne and Disco Corp

Considering the 90-day investment horizon Teradyne is expected to under-perform the Disco Corp. But the stock apears to be less risky and, when comparing its historical volatility, Teradyne is 1.34 times less risky than Disco Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Disco Corp ADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,329  in Disco Corp ADR on December 5, 2024 and sell it today you would earn a total of  100.00  from holding Disco Corp ADR or generate 4.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Teradyne  vs.  Disco Corp ADR

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 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.

Disco Corp ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Disco Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Teradyne and Disco Corp

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

The idea behind Teradyne and Disco Corp ADR 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.