Correlation Between Automatic Data and Advanced Medical

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

Diversification Opportunities for Automatic Data and Advanced Medical

0.29

Correlation Coefficient

Automatic Data  Advanced Medical

Modest diversification

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

Pair Corralation between Automatic Data and Advanced Medical

Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 2.46 times more return on investment than Advanced Medical. However, Automatic Data is 2.46 times more volatile than Advanced Medical Solutions. It trades about 0.03 of its potential returns per unit of risk. Advanced Medical Solutions is currently generating about 0.0 per unit of risk. If you would invest  21,810  in Automatic Data Processing on October 24, 2024 and sell it today you would earn a total of  7,982  from holding Automatic Data Processing or generate 36.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Automatic Data Processing  vs.  Advanced Medical Solutions

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.

Advanced Medical Sol

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Medical Solutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Advanced Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Automatic Data and Advanced Medical

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

The idea behind Automatic Data Processing and Advanced Medical Solutions 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.