Correlation Between International Business and TERADATA

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

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

Diversification Opportunities for International Business and TERADATA

0.58

Correlation Coefficient

International Business  TERADATA

Very weak diversification

The 3 months correlation between International and TERADATA is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and TERADATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TERADATA and International Business 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 International Business Machines 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 International Business i.e., International Business and TERADATA go up and down completely randomly.

Pair Corralation between International Business and TERADATA

Assuming the 90 days trading horizon International Business Machines is expected to generate 1.3 times more return on investment than TERADATA. However, International Business is 1.3 times more volatile than TERADATA. It trades about 0.03 of its potential returns per unit of risk. TERADATA is currently generating about 0.02 per unit of risk. If you would invest  21,341  in International Business Machines on October 23, 2024 and sell it today you would earn a total of  409.00  from holding International Business Machines or generate 1.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

International Business Machine  vs.  TERADATA

International Business

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, International Business is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

TERADATA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TERADATA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, TERADATA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with International Business and TERADATA

The main advantage of trading using opposite International Business and TERADATA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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 International Business Machines 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.