Correlation Between Automatic Data and Endo International

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

Diversification Opportunities for Automatic Data and Endo International

-0.21

Correlation Coefficient

Automatic Data  Endo International

Very good diversification

The 3 months correlation between Automatic and Endo is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Endo International PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endo International PLC 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 Endo International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endo International PLC has no effect on the direction of Automatic Data i.e., Automatic Data and Endo International go up and down completely randomly.

Pair Corralation between Automatic Data and Endo International

Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 1.06 times more return on investment than Endo International. However, Automatic Data is 1.06 times more volatile than Endo International PLC. It trades about 0.0 of its potential returns per unit of risk. Endo International PLC is currently generating about -0.13 per unit of risk. If you would invest  28,980  in Automatic Data Processing on October 13, 2024 and sell it today you would lose (134.00) from holding Automatic Data Processing or give up 0.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Automatic Data Processing  vs.  Endo International PLC

Automatic Data Processing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Automatic Data Processing has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Endo International PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Endo International PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Automatic Data and Endo International

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

The idea behind Automatic Data Processing and Endo International PLC 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.