Correlation Between Teradata Corp and China Shenhua

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

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

Diversification Opportunities for Teradata Corp and China Shenhua

-0.1

Correlation Coefficient

Teradata Corp  China Shenhua

Good diversification

The 3 months correlation between Teradata and China is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Teradata Corp and China Shenhua Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Shenhua Energy 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 China Shenhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Shenhua Energy has no effect on the direction of Teradata Corp i.e., Teradata Corp and China Shenhua go up and down completely randomly.

Pair Corralation between Teradata Corp and China Shenhua

Assuming the 90 days horizon Teradata Corp is expected to under-perform the China Shenhua. But the stock apears to be less risky and, when comparing its historical volatility, Teradata Corp is 1.01 times less risky than China Shenhua. The stock trades about -0.08 of its potential returns per unit of risk. The China Shenhua Energy is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  404.00  in China Shenhua Energy on October 9, 2024 and sell it today you would lose (1.00) from holding China Shenhua Energy or give up 0.25% of portfolio value over 90 days.

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

Teradata Corp  vs.  China Shenhua Energy

Teradata Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teradata Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Teradata Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Shenhua Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Shenhua Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Shenhua may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Teradata Corp and China Shenhua

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

The idea behind Teradata Corp and China Shenhua Energy 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 Global Correlations module to find global opportunities by holding instruments from different markets.