Correlation Between Foresight Group and Teradata Corp

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

By analyzing existing cross correlation between Foresight Group Holdings and Teradata Corp, you can compare the effects of market volatilities on Foresight Group 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 Foresight Group with a short position of Teradata Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foresight Group and Teradata Corp.

Diversification Opportunities for Foresight Group and Teradata Corp

-0.45

Correlation Coefficient

Foresight Group  Teradata Corp

Very good diversification

The 3 months correlation between Foresight and Teradata is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Foresight Group Holdings and Teradata Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradata Corp and Foresight Group 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 Foresight Group Holdings 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 Foresight Group i.e., Foresight Group and Teradata Corp go up and down completely randomly.

Pair Corralation between Foresight Group and Teradata Corp

Assuming the 90 days trading horizon Foresight Group Holdings is expected to under-perform the Teradata Corp. But the stock apears to be less risky and, when comparing its historical volatility, Foresight Group Holdings is 1.28 times less risky than Teradata Corp. The stock trades about -0.18 of its potential returns per unit of risk. The Teradata Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,855  in Teradata Corp on September 17, 2024 and sell it today you would earn a total of  422.00  from holding Teradata Corp or generate 14.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Foresight Group Holdings  vs.  Teradata Corp

Foresight Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foresight Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Teradata Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teradata Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Teradata Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Foresight Group and Teradata Corp

The main advantage of trading using opposite Foresight Group and Teradata Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foresight Group 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.

The idea behind Foresight Group Holdings and Teradata Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.