Correlation Between Automatic Data and Freeport McMoRan
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Freeport McMoRan 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 Freeport McMoRan 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 Freeport McMoRan, you can compare the effects of market volatilities on Automatic Data and Freeport McMoRan 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 Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Freeport McMoRan.
Diversification Opportunities for Automatic Data and Freeport McMoRan
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Automatic and Freeport is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 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 Freeport McMoRan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan has no effect on the direction of Automatic Data i.e., Automatic Data and Freeport McMoRan go up and down completely randomly.
Pair Corralation between Automatic Data and Freeport McMoRan
Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 0.44 times more return on investment than Freeport McMoRan. However, Automatic Data Processing is 2.28 times less risky than Freeport McMoRan. It trades about -0.14 of its potential returns per unit of risk. Freeport McMoRan is currently generating about -0.27 per unit of risk. If you would invest 30,230 in Automatic Data Processing on September 24, 2024 and sell it today you would lose (843.00) from holding Automatic Data Processing or give up 2.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automatic Data Processing vs. Freeport McMoRan
Performance |
| Timeline |
| Automatic Data Processing |
| Freeport McMoRan |
Automatic Data and Freeport McMoRan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Freeport McMoRan
The main advantage of trading using opposite Automatic Data and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Freeport McMoRan 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 Freeport McMoRan will offset losses from the drop in Freeport McMoRan's long position.| Automatic Data vs. Playtech Plc | Automatic Data vs. Metals Exploration Plc | Automatic Data vs. Trainline Plc | Automatic Data vs. Fulcrum Metals PLC |
| Freeport McMoRan vs. Lowland Investment Co | Freeport McMoRan vs. Supermarket Income REIT | Freeport McMoRan vs. Aberdeen Diversified Income | Freeport McMoRan vs. Bankers Investment Trust |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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