Correlation Between Paychex and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Paychex 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 Paychex and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paychex and Automatic Data Processing, you can compare the effects of market volatilities on Paychex 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 Paychex with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paychex and Automatic Data.
Diversification Opportunities for Paychex and Automatic Data
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Paychex and Automatic is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Paychex 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 Paychex 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 Paychex 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 Paychex i.e., Paychex and Automatic Data go up and down completely randomly.
Pair Corralation between Paychex and Automatic Data
Assuming the 90 days horizon Paychex is expected to generate 1.22 times less return on investment than Automatic Data. In addition to that, Paychex is 1.0 times more volatile than Automatic Data Processing. It trades about 0.07 of its total potential returns per unit of risk. Automatic Data Processing is currently generating about 0.08 per unit of volatility. If you would invest 19,116 in Automatic Data Processing on August 24, 2024 and sell it today you would earn a total of 9,289 from holding Automatic Data Processing or generate 48.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Paychex vs. Automatic Data Processing
Performance |
| Timeline |
| Paychex |
| Automatic Data Processing |
Paychex and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paychex and Automatic Data
The main advantage of trading using opposite Paychex and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paychex 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.| Paychex vs. Global Ship Lease | Paychex vs. The Boston Beer | Paychex vs. National Storage Affiliates | Paychex vs. Lendlease Group |
| Automatic Data vs. Compagnie Plastic Omnium | Automatic Data vs. AEON STORES | Automatic Data vs. Qurate Retail Series | Automatic Data vs. EAGLE MATERIALS |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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