Correlation Between TERADATA and Tower Semiconductor

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

By analyzing existing cross correlation between TERADATA and Tower Semiconductor, you can compare the effects of market volatilities on TERADATA and Tower Semiconductor 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 Tower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of TERADATA and Tower Semiconductor.

Diversification Opportunities for TERADATA and Tower Semiconductor

0.64

Correlation Coefficient

TERADATA  Tower Semiconductor

Poor diversification

The 3 months correlation between TERADATA and Tower is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding TERADATA and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor 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 Tower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Semiconductor has no effect on the direction of TERADATA i.e., TERADATA and Tower Semiconductor go up and down completely randomly.

Pair Corralation between TERADATA and Tower Semiconductor

Assuming the 90 days trading horizon TERADATA is expected to under-perform the Tower Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, TERADATA is 1.12 times less risky than Tower Semiconductor. The stock trades about -0.18 of its potential returns per unit of risk. The Tower Semiconductor is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,415  in Tower Semiconductor on November 29, 2024 and sell it today you would lose (367.00) from holding Tower Semiconductor or give up 8.31% of portfolio value over 90 days.

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

TERADATA  vs.  Tower Semiconductor

TERADATA

Risk-Adjusted Performance

Very Weak

Over the last 90 days TERADATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Tower Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tower Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with TERADATA and Tower Semiconductor

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

The idea behind TERADATA and Tower Semiconductor 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.