Correlation Between Teradyne and KRISPY KREME

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

By analyzing existing cross correlation between Teradyne and KRISPY KREME DL 01, you can compare the effects of market volatilities on Teradyne and KRISPY KREME 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 KRISPY KREME. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradyne and KRISPY KREME.

Diversification Opportunities for Teradyne and KRISPY KREME

-0.47

Correlation Coefficient

Teradyne  KRISPY KREME

Very good diversification

The 3 months correlation between Teradyne and KRISPY is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and KRISPY KREME DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KRISPY KREME DL 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 KRISPY KREME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KRISPY KREME DL has no effect on the direction of Teradyne i.e., Teradyne and KRISPY KREME go up and down completely randomly.

Pair Corralation between Teradyne and KRISPY KREME

Assuming the 90 days horizon Teradyne is expected to under-perform the KRISPY KREME. But the stock apears to be less risky and, when comparing its historical volatility, Teradyne is 1.01 times less risky than KRISPY KREME. The stock trades about -0.03 of its potential returns per unit of risk. The KRISPY KREME DL 01 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,017  in KRISPY KREME DL 01 on September 4, 2024 and sell it today you would earn a total of  23.00  from holding KRISPY KREME DL 01 or generate 2.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Teradyne  vs.  KRISPY KREME DL 01

Teradyne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teradyne has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Teradyne is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

KRISPY KREME DL

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KRISPY KREME DL 01 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KRISPY KREME is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Teradyne and KRISPY KREME

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

The idea behind Teradyne and KRISPY KREME DL 01 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.