Correlation Between Automatic Data and Prudential Plc
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Prudential Plc 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 Prudential Plc 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 Prudential plc, you can compare the effects of market volatilities on Automatic Data and Prudential Plc 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 Prudential Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Prudential Plc.
Diversification Opportunities for Automatic Data and Prudential Plc
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Automatic and Prudential is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Prudential plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential plc 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 Prudential Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential plc has no effect on the direction of Automatic Data i.e., Automatic Data and Prudential Plc go up and down completely randomly.
Pair Corralation between Automatic Data and Prudential Plc
Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 0.57 times more return on investment than Prudential Plc. However, Automatic Data Processing is 1.77 times less risky than Prudential Plc. It trades about 0.07 of its potential returns per unit of risk. Prudential plc is currently generating about 0.01 per unit of risk. If you would invest 5,005 in Automatic Data Processing on September 12, 2024 and sell it today you would earn a total of 2,565 from holding Automatic Data Processing or generate 51.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.43% |
| Values | Daily Returns |
Automatic Data Processing vs. Prudential plc
Performance |
| Timeline |
| Automatic Data Processing |
| Prudential plc |
Automatic Data and Prudential Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Prudential Plc
The main advantage of trading using opposite Automatic Data and Prudential Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Prudential Plc 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 Prudential Plc will offset losses from the drop in Prudential Plc's 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 |
| Prudential Plc vs. Take Two Interactive Software | Prudential Plc vs. MAHLE Metal Leve | Prudential Plc vs. Automatic Data Processing | Prudential Plc vs. Paycom Software |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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