Correlation Between Automatic Data and Lowes Companies
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Lowes Companies 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 Lowes Companies 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 Lowes Companies, you can compare the effects of market volatilities on Automatic Data and Lowes Companies 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 Lowes Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Lowes Companies.
Diversification Opportunities for Automatic Data and Lowes Companies
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Automatic and Lowes is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Lowes Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowes Companies 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 Lowes Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowes Companies has no effect on the direction of Automatic Data i.e., Automatic Data and Lowes Companies go up and down completely randomly.
Pair Corralation between Automatic Data and Lowes Companies
Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 1.1 times more return on investment than Lowes Companies. However, Automatic Data is 1.1 times more volatile than Lowes Companies. It trades about 0.13 of its potential returns per unit of risk. Lowes Companies is currently generating about 0.09 per unit of risk. If you would invest 4,305 in Automatic Data Processing on August 31, 2024 and sell it today you would earn a total of 3,019 from holding Automatic Data Processing or generate 70.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 69.41% |
| Values | Daily Returns |
Automatic Data Processing vs. Lowes Companies
Performance |
| Timeline |
| Automatic Data Processing |
| Lowes Companies |
Automatic Data and Lowes Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Lowes Companies
The main advantage of trading using opposite Automatic Data and Lowes Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Lowes Companies 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 Lowes Companies will offset losses from the drop in Lowes Companies' long position.| Automatic Data vs. Fras le SA | Automatic Data vs. Western Digital | Automatic Data vs. Energisa SA | Automatic Data vs. Clave Indices De |
| Lowes Companies vs. Take Two Interactive Software | Lowes Companies vs. Charter Communications | Lowes Companies vs. MAHLE Metal Leve | Lowes Companies vs. Automatic Data Processing |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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