Correlation Between Lyxor 1 and TERADATA

Can any of the company-specific risk be diversified away by investing in both Lyxor 1 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 Lyxor 1 and TERADATA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lyxor 1 and TERADATA, you can compare the effects of market volatilities on Lyxor 1 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 Lyxor 1 with a short position of TERADATA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 1 and TERADATA.

Diversification Opportunities for Lyxor 1 and TERADATA

0.7

Correlation Coefficient

Lyxor 1  TERADATA

Poor diversification

The 3 months correlation between Lyxor and TERADATA is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and TERADATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TERADATA and Lyxor 1 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 Lyxor 1 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 Lyxor 1 i.e., Lyxor 1 and TERADATA go up and down completely randomly.

Pair Corralation between Lyxor 1 and TERADATA

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 4.13 times less return on investment than TERADATA. But when comparing it to its historical volatility, Lyxor 1 is 1.47 times less risky than TERADATA. It trades about 0.06 of its potential returns per unit of risk. TERADATA is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,540  in TERADATA on September 3, 2024 and sell it today you would earn a total of  400.00  from holding TERADATA or generate 15.75% return on investment over 90 days.

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

Lyxor 1   vs.  TERADATA

Lyxor 1

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lyxor 1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

TERADATA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TERADATA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TERADATA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lyxor 1 and TERADATA

The main advantage of trading using opposite Lyxor 1 and TERADATA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor 1 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 Lyxor 1 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.