Correlation Between Automatic Data and Seven West
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Seven West 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 Seven West 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 Seven West Media, you can compare the effects of market volatilities on Automatic Data and Seven West 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 Seven West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Seven West.
Diversification Opportunities for Automatic Data and Seven West
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Automatic and Seven is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Seven West Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven West Media 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 Seven West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven West Media has no effect on the direction of Automatic Data i.e., Automatic Data and Seven West go up and down completely randomly.
Pair Corralation between Automatic Data and Seven West
Assuming the 90 days horizon Automatic Data Processing is expected to generate 0.36 times more return on investment than Seven West. However, Automatic Data Processing is 2.75 times less risky than Seven West. It trades about 0.39 of its potential returns per unit of risk. Seven West Media is currently generating about 0.05 per unit of risk. If you would invest 26,575 in Automatic Data Processing on August 31, 2024 and sell it today you would earn a total of 2,700 from holding Automatic Data Processing or generate 10.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automatic Data Processing vs. Seven West Media
Performance |
| Timeline |
| Automatic Data Processing |
| Seven West Media |
Automatic Data and Seven West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Seven West
The main advantage of trading using opposite Automatic Data and Seven West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Seven West 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 Seven West will offset losses from the drop in Seven West'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 |
| Seven West vs. MTI WIRELESS EDGE | Seven West vs. Infrastrutture Wireless Italiane | Seven West vs. MAVEN WIRELESS SWEDEN | Seven West vs. Iridium Communications |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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