Correlation Between Teradyne and Beauty Health

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

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

Diversification Opportunities for Teradyne and Beauty Health

0.69

Correlation Coefficient

Teradyne  Beauty Health

Poor diversification

The 3 months correlation between Teradyne and Beauty is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Beauty Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beauty Health 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 Beauty Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beauty Health has no effect on the direction of Teradyne i.e., Teradyne and Beauty Health go up and down completely randomly.

Pair Corralation between Teradyne and Beauty Health

Considering the 90-day investment horizon Teradyne is expected to under-perform the Beauty Health. But the stock apears to be less risky and, when comparing its historical volatility, Teradyne is 1.37 times less risky than Beauty Health. The stock trades about -0.17 of its potential returns per unit of risk. The Beauty Health Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  157.00  in Beauty Health Co on December 26, 2024 and sell it today you would lose (16.00) from holding Beauty Health Co or give up 10.19% of portfolio value over 90 days.

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

Teradyne  vs.  Beauty Health Co

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Beauty Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beauty Health Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Beauty Health is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Teradyne and Beauty Health

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

The idea behind Teradyne and Beauty Health Co 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.