Correlation Between Photronics and Teradyne

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

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

Diversification Opportunities for Photronics and Teradyne

-0.05

Correlation Coefficient

Photronics  Teradyne

Good diversification

The 3 months correlation between Photronics and Teradyne is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Photronics and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and Photronics 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 Photronics 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 Photronics i.e., Photronics and Teradyne go up and down completely randomly.

Pair Corralation between Photronics and Teradyne

Given the investment horizon of 90 days Photronics is expected to generate 1.39 times more return on investment than Teradyne. However, Photronics is 1.39 times more volatile than Teradyne. It trades about 0.06 of its potential returns per unit of risk. Teradyne is currently generating about 0.03 per unit of risk. If you would invest  1,540  in Photronics on February 10, 2024 and sell it today you would earn a total of  1,393  from holding Photronics or generate 90.45% return on investment over 90 days.

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

Photronics  vs.  Teradyne

Photronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Photronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 Photronics and Teradyne

The main advantage of trading using opposite Photronics and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Photronics 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 Photronics 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.