Correlation Between Caledonia Investments and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Caledonia Investments 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 Caledonia Investments and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Investments and Automatic Data Processing, you can compare the effects of market volatilities on Caledonia Investments 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 Caledonia Investments with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Investments and Automatic Data.
Diversification Opportunities for Caledonia Investments and Automatic Data
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Caledonia and Automatic is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Investments 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 Caledonia Investments 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 Caledonia Investments 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 Caledonia Investments i.e., Caledonia Investments and Automatic Data go up and down completely randomly.
Pair Corralation between Caledonia Investments and Automatic Data
Assuming the 90 days trading horizon Caledonia Investments is expected to generate 22.56 times less return on investment than Automatic Data. But when comparing it to its historical volatility, Caledonia Investments is 4.95 times less risky than Automatic Data. It trades about 0.01 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 22,346 in Automatic Data Processing on October 11, 2024 and sell it today you would earn a total of 6,676 from holding Automatic Data Processing or generate 29.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Caledonia Investments vs. Automatic Data Processing
Performance |
| Timeline |
| Caledonia Investments |
| Automatic Data Processing |
Caledonia Investments and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Investments and Automatic Data
The main advantage of trading using opposite Caledonia Investments and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Investments 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.| Caledonia Investments vs. Chrysalis Investments | Caledonia Investments vs. Tavistock Investments Plc | Caledonia Investments vs. Cairo Communication SpA | Caledonia Investments vs. New Residential Investment |
| Automatic Data vs. Dalata Hotel Group | Automatic Data vs. Coeur Mining | Automatic Data vs. Caledonia Investments | Automatic Data vs. First Class Metals |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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