Correlation Between Automatic Data and American Woodmark
Can any of the company-specific risk be diversified away by investing in both Automatic Data and American Woodmark 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 American Woodmark 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 American Woodmark, you can compare the effects of market volatilities on Automatic Data and American Woodmark 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 American Woodmark. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and American Woodmark.
Diversification Opportunities for Automatic Data and American Woodmark
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Automatic and American is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and American Woodmark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Woodmark 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 American Woodmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Woodmark has no effect on the direction of Automatic Data i.e., Automatic Data and American Woodmark go up and down completely randomly.
Pair Corralation between Automatic Data and American Woodmark
Assuming the 90 days horizon Automatic Data Processing is expected to generate 0.56 times more return on investment than American Woodmark. However, Automatic Data Processing is 1.79 times less risky than American Woodmark. It trades about 0.1 of its potential returns per unit of risk. American Woodmark is currently generating about -0.08 per unit of risk. If you would invest 26,551 in Automatic Data Processing on October 27, 2024 and sell it today you would earn a total of 1,824 from holding Automatic Data Processing or generate 6.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 98.36% |
Values | Daily Returns |
Automatic Data Processing vs. American Woodmark
Performance |
Timeline |
Automatic Data Processing |
American Woodmark |
Automatic Data and American Woodmark Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Automatic Data and American Woodmark
The main advantage of trading using opposite Automatic Data and American Woodmark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, American Woodmark 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 American Woodmark will offset losses from the drop in American Woodmark's long position.Automatic Data vs. SINGAPORE AIRLINES | ||
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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