Correlation Between Automatic Data and Columbia Sportswear
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Columbia Sportswear 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 Columbia Sportswear 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 Columbia Sportswear, you can compare the effects of market volatilities on Automatic Data and Columbia Sportswear 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 Columbia Sportswear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Columbia Sportswear.
Diversification Opportunities for Automatic Data and Columbia Sportswear
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Automatic and Columbia is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Columbia Sportswear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Sportswear 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 Columbia Sportswear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Sportswear has no effect on the direction of Automatic Data i.e., Automatic Data and Columbia Sportswear go up and down completely randomly.
Pair Corralation between Automatic Data and Columbia Sportswear
Assuming the 90 days horizon Automatic Data is expected to generate 2.09 times less return on investment than Columbia Sportswear. But when comparing it to its historical volatility, Automatic Data Processing is 1.9 times less risky than Columbia Sportswear. It trades about 0.32 of its potential returns per unit of risk. Columbia Sportswear is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 6,923 in Columbia Sportswear on September 1, 2024 and sell it today you would earn a total of 1,277 from holding Columbia Sportswear or generate 18.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automatic Data Processing vs. Columbia Sportswear
Performance |
| Timeline |
| Automatic Data Processing |
| Columbia Sportswear |
Automatic Data and Columbia Sportswear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Columbia Sportswear
The main advantage of trading using opposite Automatic Data and Columbia Sportswear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Columbia Sportswear 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 Columbia Sportswear will offset losses from the drop in Columbia Sportswear's long position.| Automatic Data vs. Global Ship Lease | Automatic Data vs. BOSTON BEER A | Automatic Data vs. National Beverage Corp | Automatic Data vs. Digilife Technologies Limited |
| Columbia Sportswear vs. Ralph Lauren | Columbia Sportswear vs. Superior Plus Corp | Columbia Sportswear vs. NMI Holdings | Columbia Sportswear vs. Origin Agritech |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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