Correlation Between Automatic Data and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Applied Materials 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 Applied Materials 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 Applied Materials, you can compare the effects of market volatilities on Automatic Data and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Applied Materials.
Diversification Opportunities for Automatic Data and Applied Materials
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Automatic and Applied is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Automatic Data i.e., Automatic Data and Applied Materials go up and down completely randomly.
Pair Corralation between Automatic Data and Applied Materials
Assuming the 90 days trading horizon Automatic Data Processing is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, Automatic Data Processing is 3.32 times less risky than Applied Materials. The stock trades about -0.18 of its potential returns per unit of risk. The Applied Materials is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 16,781 in Applied Materials on October 14, 2024 and sell it today you would earn a total of 520.00 from holding Applied Materials or generate 3.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Automatic Data Processing vs. Applied Materials
Performance |
| Timeline |
| Automatic Data Processing |
| Applied Materials |
Automatic Data and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Applied Materials
The main advantage of trading using opposite Automatic Data and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| Automatic Data vs. Aeorema Communications Plc | Automatic Data vs. Nordic Semiconductor ASA | Automatic Data vs. MoneysupermarketCom Group PLC | Automatic Data vs. Fevertree Drinks Plc |
| Applied Materials vs. Universal Music Group | Applied Materials vs. Alliance Data Systems | Applied Materials vs. Datalogic | Applied Materials vs. Automatic Data Processing |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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