Correlation Between Apartment Investment and Automatic Data

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

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

Diversification Opportunities for Apartment Investment and Automatic Data

0.66

Correlation Coefficient

Apartment Investment  Automatic Data

Poor diversification

The 3 months correlation between Apartment and Automatic is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Apartment Investment and 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 Apartment Investment 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 Apartment Investment and 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 Apartment Investment i.e., Apartment Investment and Automatic Data go up and down completely randomly.

Pair Corralation between Apartment Investment and Automatic Data

Assuming the 90 days trading horizon Apartment Investment is expected to generate 1.51 times less return on investment than Automatic Data. In addition to that, Apartment Investment is 1.09 times more volatile than Automatic Data Processing. It trades about 0.03 of its total potential returns per unit of risk. Automatic Data Processing is currently generating about 0.05 per unit of volatility. If you would invest  5,352  in Automatic Data Processing on September 25, 2024 and sell it today you would earn a total of  2,124  from holding Automatic Data Processing or generate 39.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	77.11%
Values	Daily Returns

Apartment Investment and  vs.  Automatic Data Processing

Apartment Investment and

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apartment Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Apartment Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Automatic Data Processing

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Automatic Data sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apartment Investment and Automatic Data

The main advantage of trading using opposite Apartment Investment and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apartment Investment 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 Apartment Investment and 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..