Correlation Between Teradyne and Raytech Holding

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

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

Diversification Opportunities for Teradyne and Raytech Holding

-0.53

Correlation Coefficient

Teradyne  Raytech Holding

Excellent diversification

The 3 months correlation between Teradyne and Raytech is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Raytech Holding Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytech Holding 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 Raytech Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytech Holding has no effect on the direction of Teradyne i.e., Teradyne and Raytech Holding go up and down completely randomly.

Pair Corralation between Teradyne and Raytech Holding

Considering the 90-day investment horizon Teradyne is expected to generate 0.18 times more return on investment than Raytech Holding. However, Teradyne is 5.62 times less risky than Raytech Holding. It trades about 0.25 of its potential returns per unit of risk. Raytech Holding Limited is currently generating about -0.01 per unit of risk. If you would invest  12,519  in Teradyne on October 20, 2024 and sell it today you would earn a total of  1,321  from holding Teradyne or generate 10.55% return on investment over 90 days.

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

Teradyne  vs.  Raytech Holding Limited

Teradyne

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 5 (%) 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 February 2025.

Raytech Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raytech Holding Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Raytech Holding 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 Raytech Holding

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

The idea behind Teradyne and Raytech Holding Limited 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.