Correlation Between Power Metal and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Power Metal 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 Power Metal and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Metal Resources and Automatic Data Processing, you can compare the effects of market volatilities on Power Metal 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 Power Metal with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Metal and Automatic Data.
Diversification Opportunities for Power Metal and Automatic Data
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Power and Automatic is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Power Metal Resources 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 Power Metal 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 Power Metal Resources 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 Power Metal i.e., Power Metal and Automatic Data go up and down completely randomly.
Pair Corralation between Power Metal and Automatic Data
Assuming the 90 days trading horizon Power Metal is expected to generate 4.77 times less return on investment than Automatic Data. But when comparing it to its historical volatility, Power Metal Resources is 1.49 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 0.04 of returns per unit of risk over similar time horizon. If you would invest 20,712 in Automatic Data Processing on December 7, 2024 and sell it today you would earn a total of 9,448 from holding Automatic Data Processing or generate 45.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.39% |
| Values | Daily Returns |
Power Metal Resources vs. Automatic Data Processing
Performance |
| Timeline |
| Power Metal Resources |
| Automatic Data Processing |
Power Metal and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Metal and Automatic Data
The main advantage of trading using opposite Power Metal and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Metal 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.| Power Metal vs. First Majestic Silver | Power Metal vs. Resolute Mining Limited | Power Metal vs. OneSavings Bank PLC | Power Metal vs. McEwen Mining |
| Automatic Data vs. Axway Software SA | Automatic Data vs. Southwest Airlines Co | Automatic Data vs. BE Semiconductor Industries | Automatic Data vs. Take Two Interactive Software |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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