Correlation Between Walmart and Teradata Corp

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

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

Diversification Opportunities for Walmart and Teradata Corp

0.49

Correlation Coefficient

Walmart  Teradata Corp

Very weak diversification

The 3 months correlation between Walmart and Teradata is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Teradata Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradata Corp and Walmart 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 Walmart 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 Walmart i.e., Walmart and Teradata Corp go up and down completely randomly.

Pair Corralation between Walmart and Teradata Corp

Assuming the 90 days trading horizon Walmart is expected to generate 1.22 times less return on investment than Teradata Corp. In addition to that, Walmart is 1.09 times more volatile than Teradata Corp. It trades about 0.15 of its total potential returns per unit of risk. Teradata Corp is currently generating about 0.2 per unit of volatility. If you would invest  2,740  in Teradata Corp on October 20, 2024 and sell it today you would earn a total of  280.00  from holding Teradata Corp or generate 10.22% return on investment over 90 days.

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

Walmart  vs.  Teradata Corp

Walmart

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Teradata Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teradata Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Teradata Corp is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Walmart and Teradata Corp

The main advantage of trading using opposite Walmart and Teradata Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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 Walmart 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.

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.