Correlation Between Bank of China Limited and TERADATA

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

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

Diversification Opportunities for Bank of China Limited and TERADATA

-0.56

Correlation Coefficient

Bank of China Limited  TERADATA

Excellent diversification

The 3 months correlation between Bank and TERADATA is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and TERADATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TERADATA and Bank of China Limited 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 Bank of China 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 Bank of China Limited i.e., Bank of China Limited and TERADATA go up and down completely randomly.

Pair Corralation between Bank of China Limited and TERADATA

Assuming the 90 days horizon Bank of China is expected to generate 1.93 times more return on investment than TERADATA. However, Bank of China Limited is 1.93 times more volatile than TERADATA. It trades about 0.21 of its potential returns per unit of risk. TERADATA is currently generating about -0.18 per unit of risk. If you would invest  33.00  in Bank of China on December 1, 2024 and sell it today you would earn a total of  21.00  from holding Bank of China or generate 63.64% return on investment over 90 days.

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

Bank of China  vs.  TERADATA

Bank of China Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of China are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bank of China Limited reported solid returns over the last few months and may actually be approaching a breakup point.

TERADATA

Risk-Adjusted Performance

Very Weak

Over the last 90 days TERADATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bank of China Limited and TERADATA

The main advantage of trading using opposite Bank of China Limited and TERADATA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of China Limited 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 Bank of China 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.