Correlation Between Automatic Data and Premier African

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

Diversification Opportunities for Automatic Data and Premier African

-0.28

Correlation Coefficient

Automatic Data  Premier African

Very good diversification

The 3 months correlation between Automatic and Premier is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Premier African Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier African Minerals 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 Premier African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier African Minerals has no effect on the direction of Automatic Data i.e., Automatic Data and Premier African go up and down completely randomly.

Pair Corralation between Automatic Data and Premier African

Assuming the 90 days trading horizon Automatic Data is expected to generate 4.01 times less return on investment than Premier African. But when comparing it to its historical volatility, Automatic Data Processing is 11.92 times less risky than Premier African. It trades about 0.14 of its potential returns per unit of risk. Premier African Minerals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5.15  in Premier African Minerals on September 13, 2024 and sell it today you would lose (0.20) from holding Premier African Minerals or give up 3.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Automatic Data Processing  vs.  Premier African Minerals

Automatic Data Processing

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Automatic Data may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Premier African Minerals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Premier African Minerals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Premier African unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Automatic Data and Premier African

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

The idea behind Automatic Data Processing and Premier African Minerals 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.