Correlation Between Arax Holdings and Teradata Corp

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

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

Diversification Opportunities for Arax Holdings and Teradata Corp

0.82

Correlation Coefficient

Arax Holdings  Teradata Corp

Very poor diversification

The 3 months correlation between Arax and Teradata is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Arax Holdings Corp and Teradata Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradata Corp and Arax Holdings 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 Arax Holdings Corp are associated (or correlated) with Teradata Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teradata Corp has no effect on the direction of Arax Holdings i.e., Arax Holdings and Teradata Corp go up and down completely randomly.

Pair Corralation between Arax Holdings and Teradata Corp

Given the investment horizon of 90 days Arax Holdings Corp is expected to generate 10.26 times more return on investment than Teradata Corp. However, Arax Holdings is 10.26 times more volatile than Teradata Corp. It trades about 0.12 of its potential returns per unit of risk. Teradata Corp is currently generating about -0.13 per unit of risk. If you would invest  22.00  in Arax Holdings Corp on December 28, 2024 and sell it today you would lose (12.00) from holding Arax Holdings Corp or give up 54.55% of portfolio value over 90 days.

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

Arax Holdings Corp  vs.  Teradata Corp

Arax Holdings Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arax Holdings Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Arax Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Teradata Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Teradata Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Arax Holdings and Teradata Corp

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

The idea behind Arax Holdings Corp and Teradata 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.