Correlation Between Woolworths Group and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Woolworths Group 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 Woolworths Group and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Woolworths Group Limited and Automatic Data Processing, you can compare the effects of market volatilities on Woolworths Group 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 Woolworths Group with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woolworths Group and Automatic Data.
Diversification Opportunities for Woolworths Group and Automatic Data
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Woolworths and Automatic is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths Group Limited 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 Woolworths Group 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 Woolworths Group Limited 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 Woolworths Group i.e., Woolworths Group and Automatic Data go up and down completely randomly.
Pair Corralation between Woolworths Group and Automatic Data
Assuming the 90 days horizon Woolworths Group Limited is expected to under-perform the Automatic Data. But the stock apears to be less risky and, when comparing its historical volatility, Woolworths Group Limited is 1.05 times less risky than Automatic Data. The stock trades about 0.0 of its potential returns per unit of risk. The Automatic Data Processing is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 23,712 in Automatic Data Processing on September 4, 2024 and sell it today you would earn a total of 5,398 from holding Automatic Data Processing or generate 22.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Woolworths Group Limited vs. Automatic Data Processing
Performance |
| Timeline |
| Woolworths Group |
| Automatic Data Processing |
Woolworths Group and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woolworths Group and Automatic Data
The main advantage of trading using opposite Woolworths Group and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woolworths Group 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.| Woolworths Group vs. Gaztransport Technigaz SA | Woolworths Group vs. Big 5 Sporting | Woolworths Group vs. Air Transport Services | Woolworths Group vs. Sunny Optical Technology |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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