Correlation Between Automatic Data and AEGEAN AIRLINES

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

Diversification Opportunities for Automatic Data and AEGEAN AIRLINES

-0.65

Correlation Coefficient

Automatic Data  AEGEAN AIRLINES

Excellent diversification

The 3 months correlation between Automatic and AEGEAN is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and AEGEAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEGEAN AIRLINES 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 AEGEAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEGEAN AIRLINES has no effect on the direction of Automatic Data i.e., Automatic Data and AEGEAN AIRLINES go up and down completely randomly.

Pair Corralation between Automatic Data and AEGEAN AIRLINES

Assuming the 90 days horizon Automatic Data Processing is expected to under-perform the AEGEAN AIRLINES. In addition to that, Automatic Data is 1.05 times more volatile than AEGEAN AIRLINES. It trades about -0.17 of its total potential returns per unit of risk. AEGEAN AIRLINES is currently generating about 0.2 per unit of volatility. If you would invest  991.00  in AEGEAN AIRLINES on October 12, 2024 and sell it today you would earn a total of  40.00  from holding AEGEAN AIRLINES or generate 4.04% return on investment over 90 days.

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

Automatic Data Processing  vs.  AEGEAN AIRLINES

Automatic Data Processing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Automatic Data is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

AEGEAN AIRLINES

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AEGEAN AIRLINES are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, AEGEAN AIRLINES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Automatic Data and AEGEAN AIRLINES

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

The idea behind Automatic Data Processing and AEGEAN AIRLINES 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.