Correlation Between Automatic Data and Lundin Mining

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

Diversification Opportunities for Automatic Data and Lundin Mining

0.29

Correlation Coefficient

Automatic Data  Lundin Mining

Modest diversification

The 3 months correlation between Automatic and Lundin is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Lundin Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Mining Corp 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 Lundin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Mining Corp has no effect on the direction of Automatic Data i.e., Automatic Data and Lundin Mining go up and down completely randomly.

Pair Corralation between Automatic Data and Lundin Mining

Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 0.33 times more return on investment than Lundin Mining. However, Automatic Data Processing is 3.03 times less risky than Lundin Mining. It trades about 0.01 of its potential returns per unit of risk. Lundin Mining Corp is currently generating about -0.06 per unit of risk. If you would invest  29,639  in Automatic Data Processing on October 25, 2024 and sell it today you would earn a total of  36.00  from holding Automatic Data Processing or generate 0.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Automatic Data Processing  vs.  Lundin Mining Corp

Automatic Data Processing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 4 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Lundin Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lundin Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Automatic Data and Lundin Mining

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

The idea behind Automatic Data Processing and Lundin Mining Corp 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.