Correlation Between Automatic Data and Global Payments
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Global Payments 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 Global Payments 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 Global Payments, you can compare the effects of market volatilities on Automatic Data and Global Payments 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 Global Payments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Global Payments.
Diversification Opportunities for Automatic Data and Global Payments
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Automatic and Global is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments 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 Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of Automatic Data i.e., Automatic Data and Global Payments go up and down completely randomly.
Pair Corralation between Automatic Data and Global Payments
Assuming the 90 days horizon Automatic Data Processing is expected to generate 0.49 times more return on investment than Global Payments. However, Automatic Data Processing is 2.05 times less risky than Global Payments. It trades about 0.18 of its potential returns per unit of risk. Global Payments is currently generating about 0.08 per unit of risk. If you would invest 22,272 in Automatic Data Processing on September 1, 2024 and sell it today you would earn a total of 6,838 from holding Automatic Data Processing or generate 30.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.24% |
| Values | Daily Returns |
Automatic Data Processing vs. Global Payments
Performance |
| Timeline |
| Automatic Data Processing |
| Global Payments |
Automatic Data and Global Payments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Global Payments
The main advantage of trading using opposite Automatic Data and Global Payments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Global Payments 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 Global Payments will offset losses from the drop in Global Payments' 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 |
| Global Payments vs. Constellation Software | Global Payments vs. Tencent Music Entertainment | Global Payments vs. Playtech plc | Global Payments vs. PLAYTIKA HOLDING DL 01 |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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