Correlation Between Power Metal and Teradata Corp

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

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

Diversification Opportunities for Power Metal and Teradata Corp

-0.12

Correlation Coefficient

Power Metal  Teradata Corp

Good diversification

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

Pair Corralation between Power Metal and Teradata Corp

Assuming the 90 days trading horizon Power Metal Resources is expected to under-perform the Teradata Corp. In addition to that, Power Metal is 1.6 times more volatile than Teradata Corp. It trades about 0.0 of its total potential returns per unit of risk. Teradata Corp is currently generating about 0.11 per unit of volatility. If you would invest  2,845  in Teradata Corp on September 13, 2024 and sell it today you would earn a total of  409.00  from holding Teradata Corp or generate 14.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Power Metal Resources  vs.  Teradata Corp

Power Metal Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Metal Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Power Metal is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Teradata Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teradata Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Teradata Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Power Metal and Teradata Corp

The main advantage of trading using opposite Power Metal and Teradata Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Metal 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 Power Metal Resources 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.