Correlation Between Canadian Utilities and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities 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 Canadian Utilities and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and Automatic Data Processing, you can compare the effects of market volatilities on Canadian Utilities 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 Canadian Utilities with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Automatic Data.
Diversification Opportunities for Canadian Utilities and Automatic Data
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Canadian and Automatic is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited 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 Canadian Utilities 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 Canadian Utilities Limited 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 Canadian Utilities i.e., Canadian Utilities and Automatic Data go up and down completely randomly.
Pair Corralation between Canadian Utilities and Automatic Data
Assuming the 90 days horizon Canadian Utilities is expected to generate 1.57 times less return on investment than Automatic Data. In addition to that, Canadian Utilities is 1.13 times more volatile than Automatic Data Processing. It trades about 0.18 of its total potential returns per unit of risk. Automatic Data Processing is currently generating about 0.32 per unit of volatility. If you would invest 26,815 in Automatic Data Processing on September 1, 2024 and sell it today you would earn a total of 2,295 from holding Automatic Data Processing or generate 8.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. Automatic Data Processing
Performance |
| Timeline |
| Canadian Utilities |
| Automatic Data Processing |
Canadian Utilities and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and Automatic Data
The main advantage of trading using opposite Canadian Utilities and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities 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.| Canadian Utilities vs. ATRESMEDIA | Canadian Utilities vs. Lamar Advertising | Canadian Utilities vs. CARSALESCOM | Canadian Utilities vs. PLAYTIKA HOLDING DL 01 |
| Automatic Data vs. Global Ship Lease | Automatic Data vs. BOSTON BEER A | Automatic Data vs. National Beverage Corp | Automatic Data vs. Digilife Technologies Limited |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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