Correlation Between WILLIS LEASE and Teradata Corp

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

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

Diversification Opportunities for WILLIS LEASE and Teradata Corp

0.71

Correlation Coefficient

WILLIS LEASE  Teradata Corp

Poor diversification

The 3 months correlation between WILLIS and Teradata is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and Teradata Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradata Corp and WILLIS LEASE 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 WILLIS LEASE FIN 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 WILLIS LEASE i.e., WILLIS LEASE and Teradata Corp go up and down completely randomly.

Pair Corralation between WILLIS LEASE and Teradata Corp

Assuming the 90 days horizon WILLIS LEASE FIN is expected to generate 1.41 times more return on investment than Teradata Corp. However, WILLIS LEASE is 1.41 times more volatile than Teradata Corp. It trades about -0.04 of its potential returns per unit of risk. Teradata Corp is currently generating about -0.24 per unit of risk. If you would invest  19,276  in WILLIS LEASE FIN on December 23, 2024 and sell it today you would lose (2,276) from holding WILLIS LEASE FIN or give up 11.81% of portfolio value over 90 days.

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

WILLIS LEASE FIN  vs.  Teradata Corp

WILLIS LEASE FIN

Risk-Adjusted Performance

Very Weak

Over the last 90 days WILLIS LEASE FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with WILLIS LEASE and Teradata Corp

The main advantage of trading using opposite WILLIS LEASE and Teradata Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WILLIS LEASE 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 WILLIS LEASE FIN 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.