Correlation Between Gaztransport Technigaz and Automatic Data

Can any of the company-specific risk be diversified away by investing in both Gaztransport Technigaz and Automatic Data 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 Gaztransport Technigaz and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gaztransport Technigaz SA and Automatic Data Processing, you can compare the effects of market volatilities on Gaztransport Technigaz and Automatic Data 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 Gaztransport Technigaz with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaztransport Technigaz and Automatic Data.

Diversification Opportunities for Gaztransport Technigaz and Automatic Data

0.75

Correlation Coefficient

Gaztransport Technigaz  Automatic Data

Poor diversification

The 3 months correlation between Gaztransport and Automatic is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Gaztransport Technigaz SA and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing and Gaztransport Technigaz 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 Gaztransport Technigaz SA are associated (or correlated) with Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Gaztransport Technigaz i.e., Gaztransport Technigaz and Automatic Data go up and down completely randomly.

Pair Corralation between Gaztransport Technigaz and Automatic Data

Assuming the 90 days horizon Gaztransport Technigaz is expected to generate 1.3 times less return on investment than Automatic Data. In addition to that, Gaztransport Technigaz is 1.34 times more volatile than Automatic Data Processing. It trades about 0.04 of its total potential returns per unit of risk. Automatic Data Processing is currently generating about 0.06 per unit of volatility. If you would invest  22,743  in Automatic Data Processing on October 5, 2024 and sell it today you would earn a total of  5,597  from holding Automatic Data Processing or generate 24.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.68%
Values	Daily Returns

Gaztransport Technigaz SA  vs.  Automatic Data Processing

Gaztransport Technigaz

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Gaztransport Technigaz SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Gaztransport Technigaz is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Automatic Data Processing

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Automatic Data may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Gaztransport Technigaz and Automatic Data

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

The idea behind Gaztransport Technigaz SA and Automatic Data Processing 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.