Correlation Between TERADATA and GMO Internet

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

Diversification Opportunities for TERADATA and GMO Internet

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between TERADATA and GMO is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding TERADATA and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet and TERADATA 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 are associated (or correlated) with GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of TERADATA i.e., TERADATA and GMO Internet go up and down completely randomly.

Pair Corralation between TERADATA and GMO Internet

Assuming the 90 days trading horizon TERADATA is expected to generate 0.46 times more return on investment than GMO Internet. However, TERADATA is 2.16 times less risky than GMO Internet. It trades about -0.05 of its potential returns per unit of risk. GMO Internet is currently generating about -0.17 per unit of risk. If you would invest  3,040  in TERADATA on October 10, 2024 and sell it today you would lose (20.00) from holding TERADATA or give up 0.66% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy94.44%
ValuesDaily Returns

TERADATA  vs.  GMO Internet

 Performance 
       Timeline  
TERADATA 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in TERADATA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TERADATA may actually be approaching a critical reversion point that can send shares even higher in February 2025.
GMO Internet 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, GMO Internet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

TERADATA and GMO Internet Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TERADATA and GMO Internet

The main advantage of trading using opposite TERADATA and GMO Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TERADATA position performs unexpectedly, GMO Internet 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 GMO Internet will offset losses from the drop in GMO Internet's long position.
The idea behind TERADATA and GMO Internet 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 Stocks Directory module to find actively traded stocks across global markets.

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