Correlation Between Teradata Corp and Xunlei

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Can any of the company-specific risk be diversified away by investing in both Teradata Corp and Xunlei 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 Xunlei into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradata Corp and Xunlei Limited, you can compare the effects of market volatilities on Teradata Corp and Xunlei 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 Xunlei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradata Corp and Xunlei.

Diversification Opportunities for Teradata Corp and Xunlei

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Teradata and Xunlei is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Teradata Corp and Xunlei Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xunlei Limited 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 Xunlei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xunlei Limited has no effect on the direction of Teradata Corp i.e., Teradata Corp and Xunlei go up and down completely randomly.

Pair Corralation between Teradata Corp and Xunlei

Considering the 90-day investment horizon Teradata Corp is expected to under-perform the Xunlei. But the stock apears to be less risky and, when comparing its historical volatility, Teradata Corp is 1.68 times less risky than Xunlei. The stock trades about -0.15 of its potential returns per unit of risk. The Xunlei Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  194.00  in Xunlei Limited on April 3, 2022 and sell it today you would lose (32.00)  from holding Xunlei Limited or give up 16.49% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Teradata Corp  vs.  Xunlei Limited

 Performance (%) 
      Timeline 
Teradata Corp 
Teradata Performance
0 of 100
Over the last 90 days Teradata Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in August 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Teradata Price Channel

Xunlei Limited 
Xunlei Performance
0 of 100
Over the last 90 days Xunlei Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Xunlei Price Channel

Teradata Corp and Xunlei Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Teradata Corp and Xunlei

The main advantage of trading using opposite Teradata Corp and Xunlei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradata Corp position performs unexpectedly, Xunlei 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 Xunlei will offset losses from the drop in Xunlei's long position.
The idea behind Teradata Corp and Xunlei Limited 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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