Correlation Between TERADATA and Mnchener Rck

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

By analyzing existing cross correlation between TERADATA and Mnchener Rck AG, you can compare the effects of market volatilities on TERADATA and Mnchener Rck 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 with a short position of Mnchener Rck. Check out your portfolio center. Please also check ongoing floating volatility patterns of TERADATA and Mnchener Rck.

Diversification Opportunities for TERADATA and Mnchener Rck

0.33

Correlation Coefficient

TERADATA  Mnchener Rck

Weak diversification

The 3 months correlation between TERADATA and Mnchener is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding TERADATA and Mnchener Rck AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mnchener Rck AG and TERADATA 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 are associated (or correlated) with Mnchener Rck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mnchener Rck AG has no effect on the direction of TERADATA i.e., TERADATA and Mnchener Rck go up and down completely randomly.

Pair Corralation between TERADATA and Mnchener Rck

Assuming the 90 days trading horizon TERADATA is expected to generate 1.09 times more return on investment than Mnchener Rck. However, TERADATA is 1.09 times more volatile than Mnchener Rck AG. It trades about 0.23 of its potential returns per unit of risk. Mnchener Rck AG is currently generating about 0.05 per unit of risk. If you would invest  2,560  in TERADATA on September 14, 2024 and sell it today you would earn a total of  520.00  from holding TERADATA or generate 20.31% return on investment over 90 days.

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

TERADATA  vs.  Mnchener Rck AG

TERADATA

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TERADATA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TERADATA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mnchener Rck AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mnchener Rck AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mnchener Rck is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TERADATA and Mnchener Rck

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

The idea behind TERADATA and Mnchener Rck AG 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.