Correlation Between Automatic Data and Sparebank
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Sparebank 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 Automatic Data and Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automatic Data Processing and Sparebank 1 SR, you can compare the effects of market volatilities on Automatic Data and Sparebank 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 Automatic Data with a short position of Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Sparebank.
Diversification Opportunities for Automatic Data and Sparebank
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Automatic and Sparebank is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Sparebank 1 SR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SR and Automatic Data 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 Automatic Data Processing are associated (or correlated) with Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebank 1 SR has no effect on the direction of Automatic Data i.e., Automatic Data and Sparebank go up and down completely randomly.
Pair Corralation between Automatic Data and Sparebank
Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 4.61 times more return on investment than Sparebank. However, Automatic Data is 4.61 times more volatile than Sparebank 1 SR. It trades about 0.03 of its potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.05 per unit of risk. If you would invest 24,161 in Automatic Data Processing on September 14, 2024 and sell it today you would earn a total of 5,851 from holding Automatic Data Processing or generate 24.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Automatic Data Processing vs. Sparebank 1 SR
Performance |
| Timeline |
| Automatic Data Processing |
| Sparebank 1 SR |
Automatic Data and Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Sparebank
The main advantage of trading using opposite Automatic Data and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Sparebank 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 Sparebank will offset losses from the drop in Sparebank's long position.| Automatic Data vs. Samsung Electronics Co | Automatic Data vs. Samsung Electronics Co | Automatic Data vs. Hyundai Motor | Automatic Data vs. Reliance Industries Ltd |
| Sparebank vs. Porvair plc | Sparebank vs. GreenX Metals | Sparebank vs. Morgan Advanced Materials | Sparebank vs. Metals Exploration Plc |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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