Correlation Between Automatic Data and Booking Holdings
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Booking Holdings 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 Booking Holdings 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 Booking Holdings, you can compare the effects of market volatilities on Automatic Data and Booking Holdings 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 Booking Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Booking Holdings.
Diversification Opportunities for Automatic Data and Booking Holdings
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Automatic and Booking is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking 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 Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of Automatic Data i.e., Automatic Data and Booking Holdings go up and down completely randomly.
Pair Corralation between Automatic Data and Booking Holdings
Assuming the 90 days trading horizon Automatic Data is expected to generate 5.54 times less return on investment than Booking Holdings. But when comparing it to its historical volatility, Automatic Data Processing is 1.63 times less risky than Booking Holdings. It trades about 0.07 of its potential returns per unit of risk. Booking Holdings is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 16,596 in Booking Holdings on September 12, 2024 and sell it today you would earn a total of 1,735 from holding Booking Holdings or generate 10.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Automatic Data Processing vs. Booking Holdings
Performance |
| Timeline |
| Automatic Data Processing |
| Booking Holdings |
Automatic Data and Booking Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Booking Holdings
The main advantage of trading using opposite Automatic Data and Booking Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Booking Holdings 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 Booking Holdings will offset losses from the drop in Booking Holdings' long position.| Automatic Data vs. The Home Depot | Automatic Data vs. Costco Wholesale | Automatic Data vs. Telecomunicaes Brasileiras SA | Automatic Data vs. Unifique Telecomunicaes SA |
| Booking Holdings vs. Royal Caribbean Cruises | Booking Holdings vs. Expedia Group | Booking Holdings vs. Carnival plc | Booking Holdings vs. Norwegian Cruise Line |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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