Correlation Between Accenture Plc and NTT Data

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

By analyzing existing cross correlation between Accenture plc and NTT Data Corp, you can compare the effects of market volatilities on Accenture Plc and NTT Data 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 Accenture Plc with a short position of NTT Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Accenture Plc and NTT Data.

Diversification Opportunities for Accenture Plc and NTT Data

0.7

Correlation Coefficient

Accenture Plc  NTT Data

Poor diversification

The 3 months correlation between Accenture and NTT is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Accenture plc and NTT Data Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NTT Data Corp and Accenture Plc 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 Accenture plc are associated (or correlated) with NTT Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NTT Data Corp has no effect on the direction of Accenture Plc i.e., Accenture Plc and NTT Data go up and down completely randomly.

Pair Corralation between Accenture Plc and NTT Data

Considering the 90-day investment horizon Accenture Plc is expected to generate 1.34 times less return on investment than NTT Data. But when comparing it to its historical volatility, Accenture plc is 1.56 times less risky than NTT Data. It trades about 0.06 of its potential returns per unit of risk. NTT Data Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,237  in NTT Data Corp on December 5, 2024 and sell it today you would earn a total of  615.00  from holding NTT Data Corp or generate 49.72% return on investment over 90 days.

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

Accenture plc  vs.  NTT Data Corp

Accenture plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Accenture plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Accenture Plc is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

NTT Data Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days NTT Data Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Accenture Plc and NTT Data

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

The idea behind Accenture plc and NTT Data Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.