Correlation Between Aehr Test and Teradyne

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

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

Diversification Opportunities for Aehr Test and Teradyne

-0.43

Correlation Coefficient

Aehr Test  Teradyne

Very good diversification

The 3 months correlation between Aehr and Teradyne is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Aehr Test Systems and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and Aehr Test 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 Aehr Test Systems 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 Aehr Test i.e., Aehr Test and Teradyne go up and down completely randomly.

Pair Corralation between Aehr Test and Teradyne

Given the investment horizon of 90 days Aehr Test Systems is expected to under-perform the Teradyne. In addition to that, Aehr Test is 1.73 times more volatile than Teradyne. It trades about -0.15 of its total potential returns per unit of risk. Teradyne is currently generating about 0.14 per unit of volatility. If you would invest  10,635  in Teradyne on February 10, 2024 and sell it today you would earn a total of  1,671  from holding Teradyne or generate 15.71% return on investment over 90 days.

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

Aehr Test Systems  vs.  Teradyne

Aehr Test Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aehr Test Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Teradyne

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, Teradyne reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aehr Test and Teradyne

The main advantage of trading using opposite Aehr Test and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aehr Test 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 Aehr Test Systems 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.