Correlation Between Teradata Corp and CN DATANG

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Can any of the company-specific risk be diversified away by investing in both Teradata Corp and CN DATANG 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 CN DATANG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradata Corp and CN DATANG C, you can compare the effects of market volatilities on Teradata Corp and CN DATANG 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 CN DATANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradata Corp and CN DATANG.

Diversification Opportunities for Teradata Corp and CN DATANG

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Teradata and DT7 is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Teradata Corp and CN DATANG C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN DATANG C 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 CN DATANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN DATANG C has no effect on the direction of Teradata Corp i.e., Teradata Corp and CN DATANG go up and down completely randomly.

Pair Corralation between Teradata Corp and CN DATANG

Assuming the 90 days horizon Teradata Corp is expected to generate 14.0 times less return on investment than CN DATANG. But when comparing it to its historical volatility, Teradata Corp is 2.07 times less risky than CN DATANG. It trades about 0.01 of its potential returns per unit of risk. CN DATANG C is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  14.00  in CN DATANG C on October 24, 2024 and sell it today you would earn a total of  10.00  from holding CN DATANG C or generate 71.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Teradata Corp  vs.  CN DATANG C

 Performance 
       Timeline  
Teradata Corp 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Teradata Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Teradata Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
CN DATANG C 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in CN DATANG C are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CN DATANG may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Teradata Corp and CN DATANG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Teradata Corp and CN DATANG

The main advantage of trading using opposite Teradata Corp and CN DATANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradata Corp position performs unexpectedly, CN DATANG 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 CN DATANG will offset losses from the drop in CN DATANG's long position.
The idea behind Teradata Corp and CN DATANG C 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.
Check out your portfolio center.
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.

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