Correlation Between Automatic Data and Vitec Software
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Vitec Software 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 Vitec Software 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 Vitec Software Group, you can compare the effects of market volatilities on Automatic Data and Vitec Software 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 Vitec Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Vitec Software.
Diversification Opportunities for Automatic Data and Vitec Software
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Automatic and Vitec is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Vitec Software Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vitec Software Group 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 Vitec Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vitec Software Group has no effect on the direction of Automatic Data i.e., Automatic Data and Vitec Software go up and down completely randomly.
Pair Corralation between Automatic Data and Vitec Software
Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 3.0 times more return on investment than Vitec Software. However, Automatic Data is 3.0 times more volatile than Vitec Software Group. It trades about 0.04 of its potential returns per unit of risk. Vitec Software Group is currently generating about 0.02 per unit of risk. If you would invest 20,663 in Automatic Data Processing on November 28, 2024 and sell it today you would earn a total of 10,710 from holding Automatic Data Processing or generate 51.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Automatic Data Processing vs. Vitec Software Group
Performance |
| Timeline |
| Automatic Data Processing |
| Vitec Software Group |
Automatic Data and Vitec Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Vitec Software
The main advantage of trading using opposite Automatic Data and Vitec Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Vitec Software 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 Vitec Software will offset losses from the drop in Vitec Software's long position.| Automatic Data vs. CVS Health Corp | Automatic Data vs. Universal Health Services | Automatic Data vs. Axway Software SA | Automatic Data vs. Aptitude Software Group |
| Vitec Software vs. Infineon Technologies AG | Vitec Software vs. Ashtead Technology Holdings | Vitec Software vs. MoneysupermarketCom Group PLC | Vitec Software vs. Sartorius Stedim Biotech |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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