Correlation Between DATATEC and Teradata Corp

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

By analyzing existing cross correlation between DATATEC LTD 2 and Teradata Corp, you can compare the effects of market volatilities on DATATEC 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 DATATEC with a short position of Teradata Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATATEC and Teradata Corp.

Diversification Opportunities for DATATEC and Teradata Corp

-0.12

Correlation Coefficient

DATATEC  Teradata Corp

Good diversification

The 3 months correlation between DATATEC and Teradata is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding DATATEC LTD 2 and Teradata Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradata Corp and DATATEC 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 DATATEC LTD 2 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 DATATEC i.e., DATATEC and Teradata Corp go up and down completely randomly.

Pair Corralation between DATATEC and Teradata Corp

Assuming the 90 days trading horizon DATATEC LTD 2 is expected to generate 0.81 times more return on investment than Teradata Corp. However, DATATEC LTD 2 is 1.24 times less risky than Teradata Corp. It trades about 0.1 of its potential returns per unit of risk. Teradata Corp is currently generating about -0.24 per unit of risk. If you would invest  440.00  in DATATEC LTD 2 on December 24, 2024 and sell it today you would earn a total of  52.00  from holding DATATEC LTD 2 or generate 11.82% return on investment over 90 days.

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

DATATEC LTD 2  vs.  Teradata Corp

DATATEC LTD 2

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DATATEC LTD 2 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DATATEC reported 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. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with DATATEC and Teradata Corp

The main advantage of trading using opposite DATATEC and Teradata Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DATATEC 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 DATATEC LTD 2 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.