Correlation Between Diamyd Medical and TERADATA

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

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

Diversification Opportunities for Diamyd Medical and TERADATA

0.4

Correlation Coefficient

Diamyd Medical  TERADATA

Very weak diversification

The 3 months correlation between Diamyd and TERADATA is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Diamyd Medical AB and TERADATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TERADATA and Diamyd Medical 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 Diamyd Medical AB are associated (or correlated) with TERADATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TERADATA has no effect on the direction of Diamyd Medical i.e., Diamyd Medical and TERADATA go up and down completely randomly.

Pair Corralation between Diamyd Medical and TERADATA

Assuming the 90 days horizon Diamyd Medical AB is expected to generate 5.6 times more return on investment than TERADATA. However, Diamyd Medical is 5.6 times more volatile than TERADATA. It trades about 0.22 of its potential returns per unit of risk. TERADATA is currently generating about 0.05 per unit of risk. If you would invest  125.00  in Diamyd Medical AB on October 5, 2024 and sell it today you would earn a total of  21.00  from holding Diamyd Medical AB or generate 16.8% return on investment over 90 days.

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

Diamyd Medical AB  vs.  TERADATA

Diamyd Medical AB

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Diamyd Medical AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Diamyd Medical reported solid returns over the last few months and may actually be approaching a breakup point.

TERADATA

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days TERADATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, TERADATA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Diamyd Medical and TERADATA

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

The idea behind Diamyd Medical AB and TERADATA 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.