Correlation Between Teradyne and MAGNA INTL

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

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

Diversification Opportunities for Teradyne and MAGNA INTL

-0.31

Correlation Coefficient

Teradyne  MAGNA INTL

Very good diversification

The 3 months correlation between Teradyne and MAGNA is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and MAGNA INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAGNA INTL 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 MAGNA INTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAGNA INTL has no effect on the direction of Teradyne i.e., Teradyne and MAGNA INTL go up and down completely randomly.

Pair Corralation between Teradyne and MAGNA INTL

Assuming the 90 days horizon Teradyne is expected to generate 1.27 times more return on investment than MAGNA INTL. However, Teradyne is 1.27 times more volatile than MAGNA INTL. It trades about 0.02 of its potential returns per unit of risk. MAGNA INTL is currently generating about 0.0 per unit of risk. If you would invest  9,519  in Teradyne on January 31, 2024 and sell it today you would earn a total of  1,241  from holding Teradyne or generate 13.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Teradyne  vs.  MAGNA INTL

Teradyne

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Teradyne reported solid returns over the last few months and may actually be approaching a breakup point.

MAGNA INTL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAGNA INTL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Teradyne and MAGNA INTL

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

The idea behind Teradyne and MAGNA INTL 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..