Correlation Between Teradata Corp and Salesforce

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

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

Diversification Opportunities for Teradata Corp and Salesforce

-0.43

Correlation Coefficient

Teradata Corp  Salesforce

Very good diversification

The 3 months correlation between Teradata and Salesforce is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Teradata Corp and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce 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 Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of Teradata Corp i.e., Teradata Corp and Salesforce go up and down completely randomly.

Pair Corralation between Teradata Corp and Salesforce

Considering the 90-day investment horizon Teradata Corp is expected to under-perform the Salesforce. In addition to that, Teradata Corp is 1.25 times more volatile than Salesforce. It trades about 0.0 of its total potential returns per unit of risk. Salesforce is currently generating about 0.11 per unit of volatility. If you would invest  16,340  in Salesforce on January 24, 2024 and sell it today you would earn a total of  11,328  from holding Salesforce or generate 69.33% return on investment over 90 days.

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

Teradata Corp  vs.  Salesforce

Teradata Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teradata Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Salesforce

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Salesforce is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Teradata Corp and Salesforce

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

The idea behind Teradata Corp and Salesforce 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.