Correlation Between Auto Trader and Teradata Corp
Can any of the company-specific risk be diversified away by investing in both Auto Trader 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 Auto Trader and Teradata Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Teradata Corp, you can compare the effects of market volatilities on Auto Trader 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 Auto Trader with a short position of Teradata Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Teradata Corp.
Diversification Opportunities for Auto Trader and Teradata Corp
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Auto and Teradata is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Teradata Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradata Corp and Auto Trader 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 Auto Trader Group 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 Auto Trader i.e., Auto Trader and Teradata Corp go up and down completely randomly.
Pair Corralation between Auto Trader and Teradata Corp
Assuming the 90 days trading horizon Auto Trader is expected to generate 14.9 times less return on investment than Teradata Corp. But when comparing it to its historical volatility, Auto Trader Group is 1.71 times less risky than Teradata Corp. It trades about 0.01 of its potential returns per unit of risk. Teradata Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,571 in Teradata Corp on November 7, 2024 and sell it today you would earn a total of 609.00 from holding Teradata Corp or generate 23.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.55% |
| Values | Daily Returns |
Auto Trader Group vs. Teradata Corp
Performance |
| Timeline |
| Auto Trader Group |
| Teradata Corp |
Auto Trader and Teradata Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Teradata Corp
The main advantage of trading using opposite Auto Trader and Teradata Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader 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.| Auto Trader vs. Porvair plc | Auto Trader vs. Wizz Air Holdings | Auto Trader vs. Batm Advanced Communications | Auto Trader vs. Liontrust Asset Management |
| Teradata Corp vs. Scandic Hotels Group | Teradata Corp vs. Ebro Foods | Teradata Corp vs. PPHE Hotel Group | Teradata Corp vs. BW Offshore |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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