Correlation Between Automatic Data and Datagroup

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

Diversification Opportunities for Automatic Data and Datagroup

0.07

Correlation Coefficient

Automatic Data  Datagroup

Significant diversification

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

Pair Corralation between Automatic Data and Datagroup

Assuming the 90 days trading horizon Automatic Data is expected to generate 1.25 times less return on investment than Datagroup. But when comparing it to its historical volatility, Automatic Data Processing is 2.51 times less risky than Datagroup. It trades about 0.08 of its potential returns per unit of risk. Datagroup SE is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,340  in Datagroup SE on October 2, 2024 and sell it today you would earn a total of  180.00  from holding Datagroup SE or generate 4.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Automatic Data Processing  vs.  Datagroup SE

Automatic Data Processing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 6 (%) 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.

Datagroup SE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Datagroup SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Datagroup 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 Datagroup

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

The idea behind Automatic Data Processing and Datagroup SE 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.