Correlation Between River and Automatic Data
Can any of the company-specific risk be diversified away by investing in both River 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 River and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between River and Mercantile and Automatic Data Processing, you can compare the effects of market volatilities on River 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 River with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of River and Automatic Data.
Diversification Opportunities for River and Automatic Data
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between River and Automatic is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile 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 River 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 River and Mercantile 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 River i.e., River and Automatic Data go up and down completely randomly.
Pair Corralation between River and Automatic Data
Assuming the 90 days trading horizon River and Mercantile is expected to under-perform the Automatic Data. But the stock apears to be less risky and, when comparing its historical volatility, River and Mercantile is 1.56 times less risky than Automatic Data. The stock trades about -0.27 of its potential returns per unit of risk. The Automatic Data Processing is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 29,332 in Automatic Data Processing on October 24, 2024 and sell it today you would earn a total of 460.00 from holding Automatic Data Processing or generate 1.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
River and Mercantile vs. Automatic Data Processing
Performance |
| Timeline |
| River and Mercantile |
| Automatic Data Processing |
River and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with River and Automatic Data
The main advantage of trading using opposite River and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if River 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.| River vs. Edita Food Industries | River vs. Veolia Environnement VE | River vs. Hilton Food Group | River vs. Premier Foods PLC |
| Automatic Data vs. Wheaton Precious Metals | Automatic Data vs. Molson Coors Beverage | Automatic Data vs. Monster Beverage Corp | Automatic Data vs. URU Metals |
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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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