Correlation Between Teradyne and Sumco Corp
Can any of the company-specific risk be diversified away by investing in both Teradyne and Sumco Corp 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 Sumco Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradyne and Sumco Corp ADR, you can compare the effects of market volatilities on Teradyne and Sumco Corp 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 Sumco Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradyne and Sumco Corp.
Diversification Opportunities for Teradyne and Sumco Corp
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Teradyne and Sumco is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Sumco Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumco Corp ADR 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 Sumco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumco Corp ADR has no effect on the direction of Teradyne i.e., Teradyne and Sumco Corp go up and down completely randomly.
Pair Corralation between Teradyne and Sumco Corp
Considering the 90-day investment horizon Teradyne is expected to under-perform the Sumco Corp. But the stock apears to be less risky and, when comparing its historical volatility, Teradyne is 1.39 times less risky than Sumco Corp. The stock trades about -0.27 of its potential returns per unit of risk. The Sumco Corp ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,490 in Sumco Corp ADR on December 5, 2024 and sell it today you would lose (1.00) from holding Sumco Corp ADR or give up 0.07% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 97.5% |
Values | Daily Returns |
Teradyne vs. Sumco Corp ADR
Performance |
Timeline |
Teradyne |
Sumco Corp ADR |
Teradyne and Sumco Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Teradyne and Sumco Corp
The main advantage of trading using opposite Teradyne and Sumco Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradyne position performs unexpectedly, Sumco Corp 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 Sumco Corp will offset losses from the drop in Sumco Corp's long position.Teradyne vs. IPG Photonics | Teradyne vs. Ultra Clean Holdings | Teradyne vs. Onto Innovation | Teradyne vs. Cohu Inc |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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