Correlation Between Automatic Data and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Rio Tinto 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 Rio Tinto 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 Rio Tinto Group, you can compare the effects of market volatilities on Automatic Data and Rio Tinto 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 Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Rio Tinto.
Diversification Opportunities for Automatic Data and Rio Tinto
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Automatic and Rio is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Rio Tinto Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto Group 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 Rio Tinto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Tinto Group has no effect on the direction of Automatic Data i.e., Automatic Data and Rio Tinto go up and down completely randomly.
Pair Corralation between Automatic Data and Rio Tinto
Assuming the 90 days horizon Automatic Data Processing is expected to generate 1.44 times more return on investment than Rio Tinto. However, Automatic Data is 1.44 times more volatile than Rio Tinto Group. It trades about -0.06 of its potential returns per unit of risk. Rio Tinto Group is currently generating about -0.43 per unit of risk. If you would invest 28,694 in Automatic Data Processing on October 10, 2024 and sell it today you would lose (499.00) from holding Automatic Data Processing or give up 1.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automatic Data Processing vs. Rio Tinto Group
Performance |
| Timeline |
| Automatic Data Processing |
| Rio Tinto Group |
Automatic Data and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Rio Tinto
The main advantage of trading using opposite Automatic Data and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Rio Tinto 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 Rio Tinto will offset losses from the drop in Rio Tinto's long position.| Automatic Data vs. Cass Information Systems | Automatic Data vs. Data Modul AG | Automatic Data vs. MICRONIC MYDATA | Automatic Data vs. Information Services International Dentsu |
| Rio Tinto vs. Tower Semiconductor | Rio Tinto vs. NXP Semiconductors NV | Rio Tinto vs. DATAGROUP SE | Rio Tinto vs. Taiwan Semiconductor Manufacturing |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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