# Correlation Between Teradyne and Microsoft

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Can any of the company-specific risk be diversified away by investing in both Teradyne and Microsoft 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 Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradyne and Microsoft, you can compare the effects of market volatilities on Teradyne and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradyne and Microsoft.

## Diversification Opportunities for Teradyne and Microsoft

 0.46 Correlation Coefficient

### Very weak diversification

The 3 months correlation between Teradyne and Microsoft is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Teradyne i.e., Teradyne and Microsoft go up and down completely randomly.

## Pair Corralation between Teradyne and Microsoft

Considering the 90-day investment horizon Teradyne is expected to generate 1.12 times less return on investment than Microsoft. In addition to that, Teradyne is 1.31 times more volatile than Microsoft. It trades about 0.1 of its total potential returns per unit of risk. Microsoft is currently generating about 0.15 per unit of volatility. If you would invest  22,723  in Microsoft on September 8, 2022 and sell it today you would earn a total of  1,834  from holding Microsoft or generate 8.07% return on investment over 90 days.
 Time Period 3 Months [change] Direction Moves Together Strength Weak Accuracy 100.0% Values Daily Returns

 Performance (%)
 Timeline
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, Teradyne may actually be approaching a critical reversion point that can send shares even higher in January 2023.

 Performance Backtest Predict
 Microsoft Correlation Profile
Microsoft Performance
0 of 100
Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

### Microsoft Price Channel

 Performance Backtest Predict

## Teradyne and Microsoft Volatility Contrast

 Predicted Return Density
 Returns