Correlation Between Teradata Corp and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Teradata Corp and Auto Trader 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 Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradata Corp and Auto Trader Group, you can compare the effects of market volatilities on Teradata Corp and Auto Trader 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 Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradata Corp and Auto Trader.
Diversification Opportunities for Teradata Corp and Auto Trader
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Teradata and Auto is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Teradata Corp and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group 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 Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Teradata Corp i.e., Teradata Corp and Auto Trader go up and down completely randomly.
Pair Corralation between Teradata Corp and Auto Trader
Assuming the 90 days trading horizon Teradata Corp is expected to under-perform the Auto Trader. In addition to that, Teradata Corp is 1.79 times more volatile than Auto Trader Group. It trades about -0.04 of its total potential returns per unit of risk. Auto Trader Group is currently generating about 0.05 per unit of volatility. If you would invest 69,863 in Auto Trader Group on September 14, 2024 and sell it today you would earn a total of 11,997 from holding Auto Trader Group or generate 17.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.46% |
| Values | Daily Returns |
Teradata Corp vs. Auto Trader Group
Performance |
| Timeline |
| Teradata Corp |
| Auto Trader Group |
Teradata Corp and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teradata Corp and Auto Trader
The main advantage of trading using opposite Teradata Corp and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradata Corp position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| Teradata Corp vs. Datagroup SE | Teradata Corp vs. Ebro Foods | Teradata Corp vs. Take Two Interactive Software | Teradata Corp vs. Scandinavian Tobacco Group |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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