Correlation Between Teradyne and Knowles Cor

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

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

Diversification Opportunities for Teradyne and Knowles Cor

0.67

Correlation Coefficient

Teradyne  Knowles Cor

Poor diversification

The 3 months correlation between Teradyne and Knowles is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Knowles Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knowles Cor 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 Knowles Cor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knowles Cor has no effect on the direction of Teradyne i.e., Teradyne and Knowles Cor go up and down completely randomly.

Pair Corralation between Teradyne and Knowles Cor

Considering the 90-day investment horizon Teradyne is expected to generate 1.67 times more return on investment than Knowles Cor. However, Teradyne is 1.67 times more volatile than Knowles Cor. It trades about 0.04 of its potential returns per unit of risk. Knowles Cor is currently generating about -0.15 per unit of risk. If you would invest  10,988  in Teradyne on November 28, 2024 and sell it today you would earn a total of  495.00  from holding Teradyne or generate 4.5% return on investment over 90 days.

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

Teradyne  vs.  Knowles Cor

Teradyne

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 3 (%) 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.

Knowles Cor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knowles Cor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Teradyne and Knowles Cor

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

The idea behind Teradyne and Knowles Cor 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.