Correlation Between Automatic Data and SILVER BULLET

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

Diversification Opportunities for Automatic Data and SILVER BULLET

0.7

Correlation Coefficient

Automatic Data  SILVER BULLET

Poor diversification

The 3 months correlation between Automatic and SILVER is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and SILVER BULLET DATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SILVER BULLET DATA 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 SILVER BULLET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SILVER BULLET DATA has no effect on the direction of Automatic Data i.e., Automatic Data and SILVER BULLET go up and down completely randomly.

Pair Corralation between Automatic Data and SILVER BULLET

Assuming the 90 days horizon Automatic Data Processing is expected to under-perform the SILVER BULLET. But the stock apears to be less risky and, when comparing its historical volatility, Automatic Data Processing is 1.62 times less risky than SILVER BULLET. The stock trades about -0.06 of its potential returns per unit of risk. The SILVER BULLET DATA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  69.00  in SILVER BULLET DATA on October 10, 2024 and sell it today you would earn a total of  2.00  from holding SILVER BULLET DATA or generate 2.9% return on investment over 90 days.

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

Automatic Data Processing  vs.  SILVER BULLET DATA

Automatic Data Processing

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 9 (%) 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.

SILVER BULLET DATA

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SILVER BULLET DATA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SILVER BULLET reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Automatic Data and SILVER BULLET

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

The idea behind Automatic Data Processing and SILVER BULLET DATA 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.