Correlation Between Rio Tinto and Teradata Corp
Can any of the company-specific risk be diversified away by investing in both Rio Tinto 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 Rio Tinto and Teradata Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio Tinto PLC and Teradata Corp, you can compare the effects of market volatilities on Rio Tinto 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 Rio Tinto with a short position of Teradata Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Teradata Corp.
Diversification Opportunities for Rio Tinto and Teradata Corp
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rio and Teradata is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto PLC and Teradata Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradata Corp and Rio Tinto 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 Rio Tinto PLC 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 Rio Tinto i.e., Rio Tinto and Teradata Corp go up and down completely randomly.
Pair Corralation between Rio Tinto and Teradata Corp
Assuming the 90 days trading horizon Rio Tinto PLC is expected to generate 0.6 times more return on investment than Teradata Corp. However, Rio Tinto PLC is 1.65 times less risky than Teradata Corp. It trades about 0.0 of its potential returns per unit of risk. Teradata Corp is currently generating about -0.01 per unit of risk. If you would invest 536,546 in Rio Tinto PLC on November 8, 2024 and sell it today you would lose (33,946) from holding Rio Tinto PLC or give up 6.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 85.34% |
| Values | Daily Returns |
Rio Tinto PLC vs. Teradata Corp
Performance |
| Timeline |
| Rio Tinto PLC |
| Teradata Corp |
Rio Tinto and Teradata Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Teradata Corp
The main advantage of trading using opposite Rio Tinto and Teradata Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto 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.| Rio Tinto vs. PPHE Hotel Group | Rio Tinto vs. UNIQA Insurance Group | Rio Tinto vs. Alfa Financial Software | Rio Tinto vs. Check Point Software |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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