Correlation Between Thermo Fisher and Teledyne Technologies

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

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

Diversification Opportunities for Thermo Fisher and Teledyne Technologies

-0.06

Correlation Coefficient

Thermo Fisher  Teledyne Technologies

Good diversification

The 3 months correlation between Thermo and Teledyne is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Thermo Fisher Scientific and Teledyne Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teledyne Technologies and Thermo Fisher 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 Thermo Fisher Scientific are associated (or correlated) with Teledyne Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teledyne Technologies has no effect on the direction of Thermo Fisher i.e., Thermo Fisher and Teledyne Technologies go up and down completely randomly.

Pair Corralation between Thermo Fisher and Teledyne Technologies

Considering the 90-day investment horizon Thermo Fisher Scientific is expected to generate 0.64 times more return on investment than Teledyne Technologies. However, Thermo Fisher Scientific is 1.56 times less risky than Teledyne Technologies. It trades about 0.05 of its potential returns per unit of risk. Teledyne Technologies Incorporated is currently generating about -0.27 per unit of risk. If you would invest  56,882  in Thermo Fisher Scientific on January 26, 2024 and sell it today you would earn a total of  857.00  from holding Thermo Fisher Scientific or generate 1.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Thermo Fisher Scientific  vs.  Teledyne Technologies Incorpor

Thermo Fisher Scientific

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thermo Fisher Scientific are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Thermo Fisher is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Teledyne Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teledyne Technologies Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Thermo Fisher and Teledyne Technologies

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

The idea behind Thermo Fisher Scientific and Teledyne Technologies Incorporated 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.