Correlation Between Automatic Data and Amkor Technology

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

Diversification Opportunities for Automatic Data and Amkor Technology

-0.67

Correlation Coefficient

Automatic Data  Amkor Technology

Excellent diversification

The 3 months correlation between Automatic and Amkor is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Amkor Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amkor Technology 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 Amkor Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amkor Technology has no effect on the direction of Automatic Data i.e., Automatic Data and Amkor Technology go up and down completely randomly.

Pair Corralation between Automatic Data and Amkor Technology

Assuming the 90 days horizon Automatic Data Processing is expected to generate 0.39 times more return on investment than Amkor Technology. However, Automatic Data Processing is 2.57 times less risky than Amkor Technology. It trades about 0.08 of its potential returns per unit of risk. Amkor Technology is currently generating about 0.02 per unit of risk. If you would invest  19,721  in Automatic Data Processing on September 30, 2024 and sell it today you would earn a total of  8,619  from holding Automatic Data Processing or generate 43.7% 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.  Amkor Technology

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 nearly fragile basic indicators, Automatic Data reported solid returns over the last few months and may actually be approaching a breakup point.

Amkor Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amkor Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Automatic Data and Amkor Technology

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

The idea behind Automatic Data Processing and Amkor Technology 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.