Correlation Between Automatic Data and Vitec Software

Can any of the company-specific risk be diversified away by investing in both Automatic Data and Vitec Software 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 Vitec Software 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 Vitec Software Group, you can compare the effects of market volatilities on Automatic Data and Vitec Software 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 Vitec Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Vitec Software.

Diversification Opportunities for Automatic Data and Vitec Software

-0.31

Correlation Coefficient

Automatic Data  Vitec Software

Very good diversification

The 3 months correlation between Automatic and Vitec is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Vitec Software Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vitec Software Group 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 Vitec Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vitec Software Group has no effect on the direction of Automatic Data i.e., Automatic Data and Vitec Software go up and down completely randomly.

Pair Corralation between Automatic Data and Vitec Software

Assuming the 90 days trading horizon Automatic Data Processing is expected to under-perform the Vitec Software. But the stock apears to be less risky and, when comparing its historical volatility, Automatic Data Processing is 1.7 times less risky than Vitec Software. The stock trades about -0.14 of its potential returns per unit of risk. The Vitec Software Group is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest  46,435  in Vitec Software Group on September 28, 2024 and sell it today you would earn a total of  8,215  from holding Vitec Software Group or generate 17.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Automatic Data Processing  vs.  Vitec Software Group

Automatic Data Processing

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Automatic Data may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vitec Software Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vitec Software Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vitec Software is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Automatic Data and Vitec Software

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

The idea behind Automatic Data Processing and Vitec Software Group 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.