Correlation Between Teradyne and ESH Acquisition

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

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

Diversification Opportunities for Teradyne and ESH Acquisition

-0.34

Correlation Coefficient

Teradyne  ESH Acquisition

Very good diversification

The 3 months correlation between Teradyne and ESH is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and ESH Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESH Acquisition 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 ESH Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESH Acquisition Corp has no effect on the direction of Teradyne i.e., Teradyne and ESH Acquisition go up and down completely randomly.

Pair Corralation between Teradyne and ESH Acquisition

Considering the 90-day investment horizon Teradyne is expected to under-perform the ESH Acquisition. In addition to that, Teradyne is 11.78 times more volatile than ESH Acquisition Corp. It trades about -0.01 of its total potential returns per unit of risk. ESH Acquisition Corp is currently generating about 0.17 per unit of volatility. If you would invest  1,056  in ESH Acquisition Corp on September 21, 2024 and sell it today you would earn a total of  25.00  from holding ESH Acquisition Corp or generate 2.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Teradyne  vs.  ESH Acquisition 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 current stock price agitation, may contribute to short-term losses for the retail investors.

ESH Acquisition Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, ESH Acquisition is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Teradyne and ESH Acquisition

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

The idea behind Teradyne and ESH Acquisition 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.