Correlation Between Automatic Data and Teradata Corp
Can any of the company-specific risk be diversified away by investing in both Automatic Data 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 Automatic Data and Teradata Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automatic Data Processing and Teradata Corp, you can compare the effects of market volatilities on Automatic Data 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 Automatic Data with a short position of Teradata Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Teradata Corp.
Diversification Opportunities for Automatic Data and Teradata Corp
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Automatic and Teradata is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Teradata Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradata Corp and Automatic Data 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 Automatic Data Processing 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 Automatic Data i.e., Automatic Data and Teradata Corp go up and down completely randomly.
Pair Corralation between Automatic Data and Teradata Corp
Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 0.42 times more return on investment than Teradata Corp. However, Automatic Data Processing is 2.4 times less risky than Teradata Corp. It trades about 0.06 of its potential returns per unit of risk. Teradata Corp is currently generating about 0.01 per unit of risk. If you would invest 28,800 in Automatic Data Processing on October 24, 2024 and sell it today you would earn a total of 992.00 from holding Automatic Data Processing or generate 3.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 88.71% |
| Values | Daily Returns |
Automatic Data Processing vs. Teradata Corp
Performance |
| Timeline |
| Automatic Data Processing |
| Teradata Corp |
Automatic Data and Teradata Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Teradata Corp
The main advantage of trading using opposite Automatic Data and Teradata Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data 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.| Automatic Data vs. Wheaton Precious Metals | Automatic Data vs. Molson Coors Beverage | Automatic Data vs. Monster Beverage Corp | Automatic Data vs. URU Metals |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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