Correlation Between Air Products and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Air Products and Automatic Data 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 Air Products and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products Chemicals and Automatic Data Processing, you can compare the effects of market volatilities on Air Products and Automatic Data 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 Air Products with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Automatic Data.
Diversification Opportunities for Air Products and Automatic Data
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Air and Automatic is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing and Air Products 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 Air Products Chemicals are associated (or correlated) with Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Air Products i.e., Air Products and Automatic Data go up and down completely randomly.
Pair Corralation between Air Products and Automatic Data
Assuming the 90 days trading horizon Air Products is expected to generate 5.22 times less return on investment than Automatic Data. In addition to that, Air Products is 1.24 times more volatile than Automatic Data Processing. It trades about 0.01 of its total potential returns per unit of risk. Automatic Data Processing is currently generating about 0.06 per unit of volatility. If you would invest 28,800 in Automatic Data Processing on October 24, 2024 and sell it today you would earn a total of 992.00 from holding Automatic Data Processing or generate 3.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Products Chemicals vs. Automatic Data Processing
Performance |
| Timeline |
| Air Products Chemicals |
| Automatic Data Processing |
Air Products and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and Automatic Data
The main advantage of trading using opposite Air Products and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, Automatic Data 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 Automatic Data will offset losses from the drop in Automatic Data's long position.| Air Products vs. Morgan Advanced Materials | Air Products vs. Worldwide Healthcare Trust | Air Products vs. Abingdon Health Plc | Air Products vs. BE Semiconductor Industries |
| Automatic Data vs. Wheaton Precious Metals | Automatic Data vs. Molson Coors Beverage | Automatic Data vs. Monster Beverage Corp | Automatic Data vs. URU Metals |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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