Correlation Between Automatic Data and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Diageo 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 Diageo 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 Diageo PLC, you can compare the effects of market volatilities on Automatic Data and Diageo 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 Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Diageo PLC.
Diversification Opportunities for Automatic Data and Diageo PLC
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Automatic and Diageo is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Diageo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo 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 Diageo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo PLC has no effect on the direction of Automatic Data i.e., Automatic Data and Diageo PLC go up and down completely randomly.
Pair Corralation between Automatic Data and Diageo PLC
Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 0.35 times more return on investment than Diageo PLC. However, Automatic Data Processing is 2.82 times less risky than Diageo PLC. It trades about 0.37 of its potential returns per unit of risk. Diageo PLC is currently generating about -0.38 per unit of risk. If you would invest 29,963 in Automatic Data Processing on November 28, 2024 and sell it today you would earn a total of 1,410 from holding Automatic Data Processing or generate 4.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automatic Data Processing vs. Diageo PLC
Performance |
| Timeline |
| Automatic Data Processing |
| Diageo PLC |
Automatic Data and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Diageo PLC
The main advantage of trading using opposite Automatic Data and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Diageo 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 Diageo PLC will offset losses from the drop in Diageo PLC'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 |
| Diageo PLC vs. EJF Investments | Diageo PLC vs. Empire Metals Limited | Diageo PLC vs. Science in Sport | Diageo PLC vs. Silvercorp Metals |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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