Correlation Between Keyence and Teledyne Technologies

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

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

Diversification Opportunities for Keyence and Teledyne Technologies

-0.7

Correlation Coefficient

Keyence  Teledyne Technologies

Excellent diversification

The 3 months correlation between Keyence and Teledyne is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Keyence and Teledyne Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teledyne Technologies and Keyence 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 Keyence 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 Keyence i.e., Keyence and Teledyne Technologies go up and down completely randomly.

Pair Corralation between Keyence and Teledyne Technologies

Assuming the 90 days horizon Keyence is expected to under-perform the Teledyne Technologies. In addition to that, Keyence is 1.13 times more volatile than Teledyne Technologies Incorporated. It trades about -0.08 of its total potential returns per unit of risk. Teledyne Technologies Incorporated is currently generating about 0.17 per unit of volatility. If you would invest  38,840  in Teledyne Technologies Incorporated on September 27, 2024 and sell it today you would earn a total of  6,050  from holding Teledyne Technologies Incorporated or generate 15.58% return on investment over 90 days.

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

Keyence  vs.  Teledyne Technologies Incorpor

Keyence

Risk-Adjusted Performance

0 of 100

Very Weak

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

Teledyne Technologies

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Teledyne Technologies Incorporated are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Teledyne Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Keyence and Teledyne Technologies

The main advantage of trading using opposite Keyence and Teledyne Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keyence 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 Keyence 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.