Correlation Between Bank of America and Teradata Corp
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and Teradata Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Teradata Corp, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of Teradata Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Teradata Corp.
Diversification Opportunities for Bank of America and Teradata Corp
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bank and Teradata is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Teradata Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradata Corp and Bank of America 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 Verizon Communications 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 Bank of America i.e., Bank of America and Teradata Corp go up and down completely randomly.
Pair Corralation between Bank of America and Teradata Corp
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.9 times more return on investment than Teradata Corp. However, Verizon Communications is 1.11 times less risky than Teradata Corp. It trades about 0.03 of its potential returns per unit of risk. Teradata Corp is currently generating about 0.01 per unit of risk. If you would invest 3,748 in Verizon Communications on October 28, 2024 and sell it today you would earn a total of 18.00 from holding Verizon Communications or generate 0.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Teradata Corp
Performance |
| Timeline |
| Verizon Communications |
| Teradata Corp |
Bank of America and Teradata Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Teradata Corp
The main advantage of trading using opposite Bank of America and Teradata Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. ATOSS SOFTWARE | Bank of America vs. Broadcom | Bank of America vs. Yuexiu Transport Infrastructure | Bank of America vs. Constellation Software |
| Teradata Corp vs. NetApp Inc | Teradata Corp vs. Pure Storage | Teradata Corp vs. NEXTDC LTD | Teradata Corp vs. SEIKOH GIKEN Co |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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