Correlation Between Teradata Corp and NetApp

Can any of the company-specific risk be diversified away by investing in both Teradata Corp and NetApp 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 NetApp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Teradata Corp and NetApp Inc, you can compare the effects of market volatilities on Teradata Corp and NetApp 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 NetApp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradata Corp and NetApp.

Diversification Opportunities for Teradata Corp and NetApp

0.53

Correlation Coefficient

Teradata Corp  NetApp

Very weak diversification

The 3 months correlation between Teradata and NetApp is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Teradata Corp and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc 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 NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of Teradata Corp i.e., Teradata Corp and NetApp go up and down completely randomly.

Pair Corralation between Teradata Corp and NetApp

Assuming the 90 days horizon Teradata Corp is expected to generate 0.71 times more return on investment than NetApp. However, Teradata Corp is 1.4 times less risky than NetApp. It trades about 0.16 of its potential returns per unit of risk. NetApp Inc is currently generating about 0.02 per unit of risk. If you would invest  2,620  in Teradata Corp on September 24, 2024 and sell it today you would earn a total of  460.00  from holding Teradata Corp or generate 17.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Teradata Corp  vs.  NetApp Inc

Teradata Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Teradata Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Teradata Corp reported solid returns over the last few months and may actually be approaching a breakup point.

NetApp Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NetApp Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NetApp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Teradata Corp and NetApp

The main advantage of trading using opposite Teradata Corp and NetApp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradata Corp position performs unexpectedly, NetApp 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 NetApp will offset losses from the drop in NetApp's long position.

The idea behind Teradata Corp and NetApp Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.