Correlation Between CBRE and Automatic Data
Can any of the company-specific risk be diversified away by investing in both CBRE and Automatic Data 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 CBRE and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CBRE Group and Automatic Data Processing, you can compare the effects of market volatilities on CBRE and Automatic Data 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 CBRE with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of CBRE and Automatic Data.
Diversification Opportunities for CBRE and Automatic Data
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CBRE and Automatic is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CBRE Group and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing and CBRE 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 CBRE Group are associated (or correlated) with Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of CBRE i.e., CBRE and Automatic Data go up and down completely randomly.
Pair Corralation between CBRE and Automatic Data
Assuming the 90 days trading horizon CBRE Group is expected to generate 4.55 times more return on investment than Automatic Data. However, CBRE is 4.55 times more volatile than Automatic Data Processing. It trades about 0.26 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.27 per unit of risk. If you would invest 61,080 in CBRE Group on August 31, 2024 and sell it today you would earn a total of 17,845 from holding CBRE Group or generate 29.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
CBRE Group vs. Automatic Data Processing
Performance |
| Timeline |
| CBRE Group |
| Automatic Data Processing |
CBRE and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CBRE and Automatic Data
The main advantage of trading using opposite CBRE and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CBRE position performs unexpectedly, Automatic Data 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 Automatic Data will offset losses from the drop in Automatic Data's long position.| CBRE vs. Automatic Data Processing | CBRE vs. Verizon Communications | CBRE vs. Fidelity National Information | CBRE vs. Raytheon Technologies |
| Automatic Data vs. Fras le SA | Automatic Data vs. Western Digital | Automatic Data vs. Energisa SA | Automatic Data vs. Clave Indices De |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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