Correlation Between Teledyne Technologies and MKS Instruments

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

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

Diversification Opportunities for Teledyne Technologies and MKS Instruments

-0.5

Correlation Coefficient

Teledyne Technologies  MKS Instruments

Very good diversification

The 3 months correlation between Teledyne and MKS is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Teledyne Technologies Incorpor and MKS Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MKS Instruments and Teledyne Technologies 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 Teledyne Technologies Incorporated are associated (or correlated) with MKS Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MKS Instruments has no effect on the direction of Teledyne Technologies i.e., Teledyne Technologies and MKS Instruments go up and down completely randomly.

Pair Corralation between Teledyne Technologies and MKS Instruments

Considering the 90-day investment horizon Teledyne Technologies Incorporated is expected to generate 0.45 times more return on investment than MKS Instruments. However, Teledyne Technologies Incorporated is 2.22 times less risky than MKS Instruments. It trades about 0.03 of its potential returns per unit of risk. MKS Instruments is currently generating about -0.02 per unit of risk. If you would invest  42,623  in Teledyne Technologies Incorporated on July 24, 2024 and sell it today you would earn a total of  2,070  from holding Teledyne Technologies Incorporated or generate 4.86% return on investment over 90 days.

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

Teledyne Technologies Incorpor  vs.  MKS Instruments

Teledyne Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teledyne Technologies Incorporated are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Teledyne Technologies may actually be approaching a critical reversion point that can send shares even higher in November 2024.

MKS Instruments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MKS Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in November 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Teledyne Technologies and MKS Instruments

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

The idea behind Teledyne Technologies Incorporated and MKS Instruments 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.