Correlation Between Teradata Corp and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both Teradata Corp and Choice Hotels 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 Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradata Corp and Choice Hotels International, you can compare the effects of market volatilities on Teradata Corp and Choice Hotels 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 Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradata Corp and Choice Hotels.
Diversification Opportunities for Teradata Corp and Choice Hotels
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Teradata and Choice is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Teradata Corp and Choice Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Hotels Intern 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 Choice Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Hotels Intern has no effect on the direction of Teradata Corp i.e., Teradata Corp and Choice Hotels go up and down completely randomly.
Pair Corralation between Teradata Corp and Choice Hotels
Assuming the 90 days horizon Teradata Corp is expected to generate 2.67 times less return on investment than Choice Hotels. In addition to that, Teradata Corp is 1.23 times more volatile than Choice Hotels International. It trades about 0.01 of its total potential returns per unit of risk. Choice Hotels International is currently generating about 0.03 per unit of volatility. If you would invest 11,067 in Choice Hotels International on October 14, 2024 and sell it today you would earn a total of 2,433 from holding Choice Hotels International or generate 21.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teradata Corp vs. Choice Hotels International
Performance |
| Timeline |
| Teradata Corp |
| Choice Hotels Intern |
Teradata Corp and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teradata Corp and Choice Hotels
The main advantage of trading using opposite Teradata Corp and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradata Corp position performs unexpectedly, Choice Hotels 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 Choice Hotels will offset losses from the drop in Choice Hotels' long position.| Teradata Corp vs. Agilent Technologies | Teradata Corp vs. Addtech AB | Teradata Corp vs. Easy Software AG | Teradata Corp vs. BioNTech SE |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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