Correlation Between Automatic Data and Supermarket Income

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

Diversification Opportunities for Automatic Data and Supermarket Income

-0.09

Correlation Coefficient

Automatic Data  Supermarket Income

Good diversification

The 3 months correlation between Automatic and Supermarket is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Supermarket Income REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supermarket Income REIT 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 Supermarket Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supermarket Income REIT has no effect on the direction of Automatic Data i.e., Automatic Data and Supermarket Income go up and down completely randomly.

Pair Corralation between Automatic Data and Supermarket Income

Assuming the 90 days trading horizon Automatic Data is expected to generate 1.76 times less return on investment than Supermarket Income. But when comparing it to its historical volatility, Automatic Data Processing is 1.74 times less risky than Supermarket Income. It trades about 0.1 of its potential returns per unit of risk. Supermarket Income REIT is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,800  in Supermarket Income REIT on October 22, 2024 and sell it today you would earn a total of  170.00  from holding Supermarket Income REIT or generate 2.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Automatic Data Processing  vs.  Supermarket Income REIT

Automatic Data Processing

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 3 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Supermarket Income REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Supermarket Income REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Supermarket Income is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Automatic Data and Supermarket Income

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

The idea behind Automatic Data Processing and Supermarket Income REIT 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.