Correlation Between Automatic Data and Bread Financial
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Bread 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 Bread 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 Bread Financial Holdings, you can compare the effects of market volatilities on Automatic Data and Bread 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 Bread Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Bread Financial.
Diversification Opportunities for Automatic Data and Bread Financial
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Automatic and Bread is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Bread Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bread Financial Holdings 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 Bread Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bread Financial Holdings has no effect on the direction of Automatic Data i.e., Automatic Data and Bread Financial go up and down completely randomly.
Pair Corralation between Automatic Data and Bread Financial
Assuming the 90 days trading horizon Automatic Data is expected to generate 1.95 times less return on investment than Bread Financial. But when comparing it to its historical volatility, Automatic Data Processing is 1.63 times less risky than Bread Financial. It trades about 0.05 of its potential returns per unit of risk. Bread Financial Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,083 in Bread Financial Holdings on September 5, 2024 and sell it today you would earn a total of 4,263 from holding Bread Financial Holdings or generate 83.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 79.71% |
| Values | Daily Returns |
Automatic Data Processing vs. Bread Financial Holdings
Performance |
| Timeline |
| Automatic Data Processing |
| Bread Financial Holdings |
Automatic Data and Bread Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Bread Financial
The main advantage of trading using opposite Automatic Data and Bread Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Bread 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 Bread Financial will offset losses from the drop in Bread Financial's long position.| Automatic Data vs. Fundo Investimento Imobiliario | Automatic Data vs. Fras le SA | Automatic Data vs. Western Digital | Automatic Data vs. Clave Indices De |
| Bread Financial vs. Taiwan Semiconductor Manufacturing | Bread Financial vs. Warner Music Group | Bread Financial vs. Agilent Technologies | Bread Financial vs. Marvell Technology |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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