Correlation Between Automatic Data and DATANG INTL
Can any of the company-specific risk be diversified away by investing in both Automatic Data and DATANG INTL 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 DATANG INTL 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 DATANG INTL POW, you can compare the effects of market volatilities on Automatic Data and DATANG INTL 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 DATANG INTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and DATANG INTL.
Diversification Opportunities for Automatic Data and DATANG INTL
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Automatic and DATANG is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and DATANG INTL POW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATANG INTL POW 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 DATANG INTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATANG INTL POW has no effect on the direction of Automatic Data i.e., Automatic Data and DATANG INTL go up and down completely randomly.
Pair Corralation between Automatic Data and DATANG INTL
Assuming the 90 days horizon Automatic Data is expected to generate 1.06 times less return on investment than DATANG INTL. But when comparing it to its historical volatility, Automatic Data Processing is 3.16 times less risky than DATANG INTL. It trades about 0.1 of its potential returns per unit of risk. DATANG INTL POW is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 13.00 in DATANG INTL POW on August 31, 2024 and sell it today you would earn a total of 3.00 from holding DATANG INTL POW or generate 23.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automatic Data Processing vs. DATANG INTL POW
Performance |
| Timeline |
| Automatic Data Processing |
| DATANG INTL POW |
Automatic Data and DATANG INTL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and DATANG INTL
The main advantage of trading using opposite Automatic Data and DATANG INTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, DATANG INTL 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 DATANG INTL will offset losses from the drop in DATANG INTL's long position.| Automatic Data vs. Clean Energy Fuels | Automatic Data vs. Federal Agricultural Mortgage | Automatic Data vs. Ultra Clean Holdings | Automatic Data vs. LION ONE METALS |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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