Correlation Between Teradyne and Westamerica Bancorporation

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

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

Diversification Opportunities for Teradyne and Westamerica Bancorporation

-0.29

Correlation Coefficient

Teradyne  Westamerica Bancorporation

Very good diversification

The 3 months correlation between Teradyne and Westamerica is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Westamerica Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westamerica Bancorporation 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 Westamerica Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westamerica Bancorporation has no effect on the direction of Teradyne i.e., Teradyne and Westamerica Bancorporation go up and down completely randomly.

Pair Corralation between Teradyne and Westamerica Bancorporation

Assuming the 90 days horizon Teradyne is expected to generate 1.09 times less return on investment than Westamerica Bancorporation. But when comparing it to its historical volatility, Teradyne is 1.01 times less risky than Westamerica Bancorporation. It trades about 0.06 of its potential returns per unit of risk. Westamerica Bancorporation is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,378  in Westamerica Bancorporation on October 15, 2024 and sell it today you would earn a total of  442.00  from holding Westamerica Bancorporation or generate 10.1% return on investment over 90 days.

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

Teradyne  vs.  Westamerica Bancorp.

Teradyne

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Teradyne may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Westamerica Bancorporation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Westamerica Bancorporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Westamerica Bancorporation reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teradyne and Westamerica Bancorporation

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

The idea behind Teradyne and Westamerica Bancorporation 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.