Correlation Between Teradyne and Broadcom

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

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

Diversification Opportunities for Teradyne and Broadcom

0.89

Correlation Coefficient

Teradyne  Broadcom

Very poor diversification

The 3 months correlation between Teradyne and Broadcom is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom 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 Broadcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadcom has no effect on the direction of Teradyne i.e., Teradyne and Broadcom go up and down completely randomly.

Pair Corralation between Teradyne and Broadcom

Considering the 90-day investment horizon Teradyne is expected to generate 1.02 times less return on investment than Broadcom. In addition to that, Teradyne is 1.64 times more volatile than Broadcom. It trades about 0.18 of its total potential returns per unit of risk. Broadcom is currently generating about 0.3 per unit of volatility. If you would invest  19,962  in Broadcom on May 6, 2025 and sell it today you would earn a total of  8,902  from holding Broadcom or generate 44.59% return on investment over 90 days.

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

Teradyne  vs.  Broadcom

Teradyne

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, Teradyne reported solid returns over the last few months and may actually be approaching a breakup point.

Broadcom

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Broadcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teradyne and Broadcom

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

The idea behind Teradyne and Broadcom 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.