Correlation Between Teradyne and Camtek

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

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

Diversification Opportunities for Teradyne and Camtek

0.94

Correlation Coefficient

Teradyne  Camtek

Almost no diversification

The 3 months correlation between Teradyne and Camtek is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Camtek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Camtek 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 Camtek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Camtek has no effect on the direction of Teradyne i.e., Teradyne and Camtek go up and down completely randomly.

Pair Corralation between Teradyne and Camtek

Considering the 90-day investment horizon Teradyne is expected to generate 1.11 times less return on investment than Camtek. But when comparing it to its historical volatility, Teradyne is 1.58 times less risky than Camtek. It trades about 0.54 of its potential returns per unit of risk. Camtek is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  7,888  in Camtek on March 2, 2024 and sell it today you would earn a total of  2,108  from holding Camtek or generate 26.72% return on investment over 90 days.

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

Teradyne  vs.  Camtek

Teradyne

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 15 (%) 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.

Camtek

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Camtek are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Camtek unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teradyne and Camtek

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

The idea behind Teradyne and Camtek 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.