Correlation Between Automatic Data and Basic Materials
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Basic Materials 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 Basic Materials 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 Basic Materials, you can compare the effects of market volatilities on Automatic Data and Basic Materials 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 Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Basic Materials.
Diversification Opportunities for Automatic Data and Basic Materials
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Automatic and Basic is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials 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 Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of Automatic Data i.e., Automatic Data and Basic Materials go up and down completely randomly.
Pair Corralation between Automatic Data and Basic Materials
Assuming the 90 days trading horizon Automatic Data Processing is expected to under-perform the Basic Materials. But the stock apears to be less risky and, when comparing its historical volatility, Automatic Data Processing is 1.15 times less risky than Basic Materials. The stock trades about -0.05 of its potential returns per unit of risk. The Basic Materials is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 538,189 in Basic Materials on November 4, 2024 and sell it today you would earn a total of 13,716 from holding Basic Materials or generate 2.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automatic Data Processing vs. Basic Materials
Performance |
| Timeline |
Automatic Data and Basic Materials Volatility Contrast
Predicted Return Density |
| Returns |
Automatic Data Processing
Pair trading matchups for Automatic Data
Basic Materials
Pair trading matchups for Basic Materials
Pair Trading with Automatic Data and Basic Materials
The main advantage of trading using opposite Automatic Data and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.| Automatic Data vs. Spotify Technology SA | Automatic Data vs. Globus Medical, | Automatic Data vs. Academy Sports and | Automatic Data vs. Caesars Entertainment, |
| Basic Materials vs. Hormel Foods | Basic Materials vs. Brpr Corporate Offices | Basic Materials vs. Seagate Technology Holdings | Basic Materials vs. Global X Funds |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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