Correlation Between Teradata Corp and GROUNDS REST

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

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

Diversification Opportunities for Teradata Corp and GROUNDS REST

0.27

Correlation Coefficient

Teradata Corp  GROUNDS REST

Modest diversification

The 3 months correlation between Teradata and GROUNDS is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Teradata Corp and GROUNDS REST NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GROUNDS REST NA 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 GROUNDS REST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GROUNDS REST NA has no effect on the direction of Teradata Corp i.e., Teradata Corp and GROUNDS REST go up and down completely randomly.

Pair Corralation between Teradata Corp and GROUNDS REST

Assuming the 90 days horizon Teradata Corp is expected to generate 0.42 times more return on investment than GROUNDS REST. However, Teradata Corp is 2.36 times less risky than GROUNDS REST. It trades about 0.0 of its potential returns per unit of risk. GROUNDS REST NA is currently generating about -0.01 per unit of risk. If you would invest  3,154  in Teradata Corp on October 23, 2024 and sell it today you would lose (214.00) from holding Teradata Corp or give up 6.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Teradata Corp  vs.  GROUNDS REST NA

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.

GROUNDS REST NA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GROUNDS REST NA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, GROUNDS REST reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teradata Corp and GROUNDS REST

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

The idea behind Teradata Corp and GROUNDS REST NA 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.