Correlation Between Automatic Data and FinecoBank SpA

Can any of the company-specific risk be diversified away by investing in both Automatic Data and FinecoBank SpA 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 Automatic Data and FinecoBank SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Automatic Data Processing and FinecoBank SpA, you can compare the effects of market volatilities on Automatic Data and FinecoBank SpA 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 Automatic Data with a short position of FinecoBank SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and FinecoBank SpA.

Diversification Opportunities for Automatic Data and FinecoBank SpA

-0.07

Correlation Coefficient

Automatic Data  FinecoBank SpA

Good diversification

The 3 months correlation between Automatic and FinecoBank is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and FinecoBank SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FinecoBank SpA and Automatic Data 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 Automatic Data Processing are associated (or correlated) with FinecoBank SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FinecoBank SpA has no effect on the direction of Automatic Data i.e., Automatic Data and FinecoBank SpA go up and down completely randomly.

Pair Corralation between Automatic Data and FinecoBank SpA

Assuming the 90 days trading horizon Automatic Data Processing is expected to under-perform the FinecoBank SpA. But the stock apears to be less risky and, when comparing its historical volatility, Automatic Data Processing is 1.17 times less risky than FinecoBank SpA. The stock trades about -0.18 of its potential returns per unit of risk. The FinecoBank SpA is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,670  in FinecoBank SpA on October 11, 2024 and sell it today you would earn a total of  75.00  from holding FinecoBank SpA or generate 4.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Automatic Data Processing  vs.  FinecoBank SpA

Automatic Data Processing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Automatic Data is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

FinecoBank SpA

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FinecoBank SpA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FinecoBank SpA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Automatic Data and FinecoBank SpA

The main advantage of trading using opposite Automatic Data and FinecoBank SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, FinecoBank SpA 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 FinecoBank SpA will offset losses from the drop in FinecoBank SpA's long position.

The idea behind Automatic Data Processing and FinecoBank SpA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.