Correlation Between Automatic Data and MediaZest Plc

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

Diversification Opportunities for Automatic Data and MediaZest Plc

-0.12

Correlation Coefficient

Automatic Data  MediaZest Plc

Good diversification

The 3 months correlation between Automatic and MediaZest is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and MediaZest plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaZest 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 MediaZest Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MediaZest plc has no effect on the direction of Automatic Data i.e., Automatic Data and MediaZest Plc go up and down completely randomly.

Pair Corralation between Automatic Data and MediaZest Plc

Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 7.99 times more return on investment than MediaZest Plc. However, Automatic Data is 7.99 times more volatile than MediaZest plc. It trades about 0.08 of its potential returns per unit of risk. MediaZest plc is currently generating about -0.05 per unit of risk. If you would invest  29,721  in Automatic Data Processing on December 25, 2024 and sell it today you would earn a total of  234.00  from holding Automatic Data Processing or generate 0.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Automatic Data Processing  vs.  MediaZest plc

Automatic Data Processing

Risk-Adjusted Performance

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 unsteady basic indicators, Automatic Data unveiled solid returns over the last few months and may actually be approaching a breakup point.

MediaZest plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days MediaZest plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Automatic Data and MediaZest Plc

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

The idea behind Automatic Data Processing and MediaZest 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.