Correlation Between Automatic Data and Clean Power

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

Diversification Opportunities for Automatic Data and Clean Power

0.04

Correlation Coefficient

Automatic Data  Clean Power

Significant diversification

The 3 months correlation between Automatic and Clean is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Clean Power Hydrogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Power Hydrogen 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 Clean Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Power Hydrogen has no effect on the direction of Automatic Data i.e., Automatic Data and Clean Power go up and down completely randomly.

Pair Corralation between Automatic Data and Clean Power

Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 0.65 times more return on investment than Clean Power. However, Automatic Data Processing is 1.53 times less risky than Clean Power. It trades about -0.26 of its potential returns per unit of risk. Clean Power Hydrogen is currently generating about -0.4 per unit of risk. If you would invest  30,246  in Automatic Data Processing on October 12, 2024 and sell it today you would lose (1,224) from holding Automatic Data Processing or give up 4.05% of portfolio value over 90 days.

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

Automatic Data Processing  vs.  Clean Power Hydrogen

Automatic Data Processing

Risk-Adjusted Performance

0 of 100

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.

Clean Power Hydrogen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Power Hydrogen 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 Clean Power

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

The idea behind Automatic Data Processing and Clean Power Hydrogen 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.