Correlation Between Teradyne and Lipocine

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

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

Diversification Opportunities for Teradyne and Lipocine

-0.36

Correlation Coefficient

Teradyne  Lipocine

Very good diversification

The 3 months correlation between Teradyne and Lipocine is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine 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 Lipocine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lipocine has no effect on the direction of Teradyne i.e., Teradyne and Lipocine go up and down completely randomly.

Pair Corralation between Teradyne and Lipocine

Considering the 90-day investment horizon Teradyne is expected to generate 0.46 times more return on investment than Lipocine. However, Teradyne is 2.18 times less risky than Lipocine. It trades about 0.13 of its potential returns per unit of risk. Lipocine is currently generating about -0.07 per unit of risk. If you would invest  11,163  in Teradyne on October 25, 2024 and sell it today you would earn a total of  2,020  from holding Teradyne or generate 18.1% return on investment over 90 days.

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

Teradyne  vs.  Lipocine

Teradyne

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Teradyne reported solid returns over the last few months and may actually be approaching a breakup point.

Lipocine

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Teradyne and Lipocine

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

The idea behind Teradyne and Lipocine 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.