Correlation Between Automatic Data and Webster Financial
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Webster Financial 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 Webster Financial 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 Webster Financial, you can compare the effects of market volatilities on Automatic Data and Webster Financial 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 Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Webster Financial.
Diversification Opportunities for Automatic Data and Webster Financial
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Automatic and Webster is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial 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 Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of Automatic Data i.e., Automatic Data and Webster Financial go up and down completely randomly.
Pair Corralation between Automatic Data and Webster Financial
Assuming the 90 days horizon Automatic Data Processing is expected to generate 0.52 times more return on investment than Webster Financial. However, Automatic Data Processing is 1.92 times less risky than Webster Financial. It trades about 0.06 of its potential returns per unit of risk. Webster Financial is currently generating about 0.03 per unit of risk. If you would invest 20,322 in Automatic Data Processing on November 7, 2024 and sell it today you would earn a total of 9,008 from holding Automatic Data Processing or generate 44.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automatic Data Processing vs. Webster Financial
Performance |
| Timeline |
| Automatic Data Processing |
| Webster Financial |
Automatic Data and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Webster Financial
The main advantage of trading using opposite Automatic Data and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Webster Financial 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 Webster Financial will offset losses from the drop in Webster Financial's long position.| Automatic Data vs. Goosehead Insurance | Automatic Data vs. INSURANCE AUST GRP | Automatic Data vs. Insurance Australia Group | Automatic Data vs. Siamgas And Petrochemicals |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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