Correlation Between Chevron Corp and Teradata Corp

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

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

Diversification Opportunities for Chevron Corp and Teradata Corp

-0.72

Correlation Coefficient

Chevron Corp  Teradata Corp

Pay attention - limited upside

The 3 months correlation between Chevron and Teradata is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Teradata Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradata Corp and Chevron 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 Chevron Corp 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 Chevron Corp i.e., Chevron Corp and Teradata Corp go up and down completely randomly.

Pair Corralation between Chevron Corp and Teradata Corp

Considering the 90-day investment horizon Chevron Corp is expected to generate 0.62 times more return on investment than Teradata Corp. However, Chevron Corp is 1.6 times less risky than Teradata Corp. It trades about 0.21 of its potential returns per unit of risk. Teradata Corp is currently generating about -0.13 per unit of risk. If you would invest  15,455  in Chevron Corp on January 20, 2024 and sell it today you would earn a total of  545.00  from holding Chevron Corp or generate 3.53% return on investment over 90 days.

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

Chevron Corp  vs.  Teradata Corp

Chevron Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Chevron Corp showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Chevron Corp and Teradata Corp

The main advantage of trading using opposite Chevron Corp and Teradata Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp 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 Chevron Corp 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 CEOs Directory module to screen CEOs from public companies around the world.