Correlation Between Teradata Corp and NEXON Co

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

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

Diversification Opportunities for Teradata Corp and NEXON Co

0.24

Correlation Coefficient

Teradata Corp  NEXON Co

Modest diversification

The 3 months correlation between Teradata and NEXON is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Teradata Corp and NEXON Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXON Co and Teradata Corp 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 Teradata Corp are associated (or correlated) with NEXON Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXON Co has no effect on the direction of Teradata Corp i.e., Teradata Corp and NEXON Co go up and down completely randomly.

Pair Corralation between Teradata Corp and NEXON Co

Assuming the 90 days horizon Teradata Corp is expected to generate 131.09 times less return on investment than NEXON Co. But when comparing it to its historical volatility, Teradata Corp is 9.55 times less risky than NEXON Co. It trades about 0.01 of its potential returns per unit of risk. NEXON Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  710.00  in NEXON Co on October 23, 2024 and sell it today you would earn a total of  600.00  from holding NEXON Co or generate 84.51% return on investment over 90 days.

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

Teradata Corp  vs.  NEXON Co

Teradata Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Teradata Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Teradata Corp is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

NEXON Co

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NEXON Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NEXON Co unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teradata Corp and NEXON Co

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

The idea behind Teradata Corp and NEXON Co 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.