Correlation Between Molson Coors and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Molson Coors 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 Molson Coors and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Molson Coors Beverage and Automatic Data Processing, you can compare the effects of market volatilities on Molson Coors 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 Molson Coors with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molson Coors and Automatic Data.
Diversification Opportunities for Molson Coors and Automatic Data
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Molson and Automatic is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Beverage 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 Molson Coors 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 Molson Coors Beverage 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 Molson Coors i.e., Molson Coors and Automatic Data go up and down completely randomly.
Pair Corralation between Molson Coors and Automatic Data
Assuming the 90 days trading horizon Molson Coors is expected to generate 4.56 times less return on investment than Automatic Data. But when comparing it to its historical volatility, Molson Coors Beverage is 1.37 times less risky than Automatic Data. It trades about 0.02 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,131 in Automatic Data Processing on October 16, 2024 and sell it today you would earn a total of 2,204 from holding Automatic Data Processing or generate 42.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 77.76% |
| Values | Daily Returns |
Molson Coors Beverage vs. Automatic Data Processing
Performance |
| Timeline |
| Molson Coors Beverage |
| Automatic Data Processing |
Molson Coors and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Molson Coors and Automatic Data
The main advantage of trading using opposite Molson Coors and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Molson Coors 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.| Molson Coors vs. Taiwan Semiconductor Manufacturing | Molson Coors vs. Apple Inc | Molson Coors vs. Alibaba Group Holding | Molson Coors vs. Banco Santander Chile |
| Automatic Data vs. Charter Communications | Automatic Data vs. BIONTECH SE DRN | Automatic Data vs. SK Telecom Co, | Automatic Data vs. Public Storage |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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