Correlation Between Automatic Data and Carnival PLC
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Carnival PLC 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 Carnival PLC 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 Carnival PLC, you can compare the effects of market volatilities on Automatic Data and Carnival PLC 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 Carnival PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Carnival PLC.
Diversification Opportunities for Automatic Data and Carnival PLC
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Automatic and Carnival is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Carnival PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival PLC 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 Carnival PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival PLC has no effect on the direction of Automatic Data i.e., Automatic Data and Carnival PLC go up and down completely randomly.
Pair Corralation between Automatic Data and Carnival PLC
Assuming the 90 days trading horizon Automatic Data is expected to generate 1.38 times less return on investment than Carnival PLC. In addition to that, Automatic Data is 2.08 times more volatile than Carnival PLC. It trades about 0.03 of its total potential returns per unit of risk. Carnival PLC is currently generating about 0.09 per unit of volatility. If you would invest 62,040 in Carnival PLC on September 5, 2024 and sell it today you would earn a total of 124,610 from holding Carnival PLC or generate 200.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.4% |
| Values | Daily Returns |
Automatic Data Processing vs. Carnival PLC
Performance |
| Timeline |
| Automatic Data Processing |
| Carnival PLC |
Automatic Data and Carnival PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Carnival PLC
The main advantage of trading using opposite Automatic Data and Carnival PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Carnival PLC 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 Carnival PLC will offset losses from the drop in Carnival PLC's long position.| Automatic Data vs. Samsung Electronics Co | Automatic Data vs. Samsung Electronics Co | Automatic Data vs. Hyundai Motor | Automatic Data vs. Toyota Motor Corp |
| Carnival PLC vs. Automatic Data Processing | Carnival PLC vs. Extra Space Storage | Carnival PLC vs. Jupiter Fund Management | Carnival PLC vs. Associated British Foods |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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