Correlation Between Teradata Corp and Arax Holdings

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

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

Diversification Opportunities for Teradata Corp and Arax Holdings

0.82

Correlation Coefficient

Teradata Corp  Arax Holdings

Very poor diversification

The 3 months correlation between Teradata and Arax is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Teradata Corp and Arax Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arax Holdings Corp and Teradata Corp 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 Teradata Corp are associated (or correlated) with Arax Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arax Holdings Corp has no effect on the direction of Teradata Corp i.e., Teradata Corp and Arax Holdings go up and down completely randomly.

Pair Corralation between Teradata Corp and Arax Holdings

Considering the 90-day investment horizon Teradata Corp is expected to under-perform the Arax Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Teradata Corp is 10.26 times less risky than Arax Holdings. The stock trades about -0.13 of its potential returns per unit of risk. The Arax Holdings Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Arax Holdings Corp on December 28, 2024 and sell it today you would lose (12.00) from holding Arax Holdings Corp or give up 54.55% of portfolio value over 90 days.

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

Teradata Corp  vs.  Arax Holdings Corp

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. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Arax Holdings Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arax Holdings Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Arax Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teradata Corp and Arax Holdings

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

The idea behind Teradata Corp and Arax Holdings 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.