Correlation Between Automatic Data and DG Innovate
Can any of the company-specific risk be diversified away by investing in both Automatic Data and DG Innovate 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 DG Innovate 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 DG Innovate PLC, you can compare the effects of market volatilities on Automatic Data and DG Innovate 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 DG Innovate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and DG Innovate.
Diversification Opportunities for Automatic Data and DG Innovate
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Automatic and DGI is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and DG Innovate PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DG Innovate 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 DG Innovate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DG Innovate PLC has no effect on the direction of Automatic Data i.e., Automatic Data and DG Innovate go up and down completely randomly.
Pair Corralation between Automatic Data and DG Innovate
Assuming the 90 days trading horizon Automatic Data is expected to generate 6.08 times less return on investment than DG Innovate. But when comparing it to its historical volatility, Automatic Data Processing is 6.23 times less risky than DG Innovate. It trades about 0.24 of its potential returns per unit of risk. DG Innovate PLC is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 6.80 in DG Innovate PLC on September 2, 2024 and sell it today you would earn a total of 2.70 from holding DG Innovate PLC or generate 39.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automatic Data Processing vs. DG Innovate PLC
Performance |
| Timeline |
| Automatic Data Processing |
| DG Innovate PLC |
Automatic Data and DG Innovate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and DG Innovate
The main advantage of trading using opposite Automatic Data and DG Innovate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, DG Innovate 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 DG Innovate will offset losses from the drop in DG Innovate's long position.| Automatic Data vs. National Beverage Corp | Automatic Data vs. Infrastrutture Wireless Italiane | Automatic Data vs. Broadcom | Automatic Data vs. Gaztransport et Technigaz |
| DG Innovate vs. McEwen Mining | DG Innovate vs. Automatic Data Processing | DG Innovate vs. GoldMining | DG Innovate vs. Alliance Data Systems |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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