Correlation Between TRAVELERS and Teradyne

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

By analyzing existing cross correlation between TRAVELERS INC 405 and Teradyne, you can compare the effects of market volatilities on TRAVELERS and Teradyne 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 TRAVELERS with a short position of Teradyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVELERS and Teradyne.

Diversification Opportunities for TRAVELERS and Teradyne

-0.23

Correlation Coefficient

TRAVELERS  Teradyne

Very good diversification

The 3 months correlation between TRAVELERS and Teradyne is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding TRAVELERS INC 405 and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and TRAVELERS 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 TRAVELERS INC 405 are associated (or correlated) with Teradyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teradyne has no effect on the direction of TRAVELERS i.e., TRAVELERS and Teradyne go up and down completely randomly.

Pair Corralation between TRAVELERS and Teradyne

Assuming the 90 days trading horizon TRAVELERS is expected to generate 2.52 times less return on investment than Teradyne. In addition to that, TRAVELERS is 1.03 times more volatile than Teradyne. It trades about 0.02 of its total potential returns per unit of risk. Teradyne is currently generating about 0.06 per unit of volatility. If you would invest  12,880  in Teradyne on October 10, 2024 and sell it today you would earn a total of  1,002  from holding Teradyne or generate 7.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	52.46%
Values	Daily Returns

TRAVELERS INC 405  vs.  Teradyne

TRAVELERS INC 405

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVELERS INC 405 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TRAVELERS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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. 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.

Pair Trading with TRAVELERS and Teradyne

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

The idea behind TRAVELERS INC 405 and Teradyne 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.