Correlation Between Microsoft and Teradata Corp
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Teradata Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Teradata Corp, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Teradata Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Teradata Corp.
Diversification Opportunities for Microsoft and Teradata Corp
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and Teradata is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Teradata Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradata Corp and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Teradata Corp go up and down completely randomly.
Pair Corralation between Microsoft and Teradata Corp
Given the investment horizon of 90 days Microsoft is expected to generate 0.5 times more return on investment than Teradata Corp. However, Microsoft is 2.02 times less risky than Teradata Corp. It trades about 0.14 of its potential returns per unit of risk. Teradata Corp is currently generating about -0.04 per unit of risk. If you would invest 32,805 in Microsoft on January 19, 2024 and sell it today you would earn a total of 7,622 from holding Microsoft or generate 23.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Teradata Corp
Performance |
| Timeline |
| Microsoft |
| Teradata Corp |
Microsoft and Teradata Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Teradata Corp
The main advantage of trading using opposite Microsoft and Teradata Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Teradata Corp vs. EverCommerce | Teradata Corp vs. i3 Verticals | Teradata Corp vs. Global Blue Group | Teradata Corp vs. Evertec |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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