Correlation Between Prudential Plc and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Prudential Plc 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 Prudential Plc and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential plc and Automatic Data Processing, you can compare the effects of market volatilities on Prudential Plc 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 Prudential Plc with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Plc and Automatic Data.
Diversification Opportunities for Prudential Plc and Automatic Data
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Prudential and Automatic is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Prudential plc 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 Prudential Plc 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 Prudential plc 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 Prudential Plc i.e., Prudential Plc and Automatic Data go up and down completely randomly.
Pair Corralation between Prudential Plc and Automatic Data
Assuming the 90 days trading horizon Prudential Plc is expected to generate 5.77 times less return on investment than Automatic Data. In addition to that, Prudential Plc is 2.26 times more volatile than Automatic Data Processing. It trades about 0.01 of its total potential returns per unit of risk. Automatic Data Processing is currently generating about 0.19 per unit of volatility. If you would invest 27,458 in Automatic Data Processing on September 3, 2024 and sell it today you would earn a total of 3,292 from holding Automatic Data Processing or generate 11.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential plc vs. Automatic Data Processing
Performance |
| Timeline |
| Prudential plc |
| Automatic Data Processing |
Prudential Plc and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Plc and Automatic Data
The main advantage of trading using opposite Prudential Plc and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Plc 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.| Prudential Plc vs. Automatic Data Processing | Prudential Plc vs. Orient Telecoms | Prudential Plc vs. Batm Advanced Communications | Prudential Plc vs. GlobalData PLC |
| Automatic Data vs. Bell Food Group | Automatic Data vs. Allianz Technology Trust | Automatic Data vs. L3Harris Technologies | Automatic Data vs. Celebrus Technologies plc |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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