Correlation Between Automatic Data and Gladstone Commercial

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

Diversification Opportunities for Automatic Data and Gladstone Commercial

0.93

Correlation Coefficient

Automatic Data  Gladstone Commercial

Almost no diversification

The 3 months correlation between Automatic and Gladstone is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Gladstone Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Commercial 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 Gladstone Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Commercial has no effect on the direction of Automatic Data i.e., Automatic Data and Gladstone Commercial go up and down completely randomly.

Pair Corralation between Automatic Data and Gladstone Commercial

Assuming the 90 days horizon Automatic Data Processing is expected to generate 0.97 times more return on investment than Gladstone Commercial. However, Automatic Data Processing is 1.04 times less risky than Gladstone Commercial. It trades about 0.05 of its potential returns per unit of risk. Gladstone Commercial is currently generating about -0.05 per unit of risk. If you would invest  27,893  in Automatic Data Processing on October 11, 2024 and sell it today you would earn a total of  302.00  from holding Automatic Data Processing or generate 1.08% return on investment over 90 days.

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

Automatic Data Processing  vs.  Gladstone Commercial

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 uncertain basic indicators, Automatic Data may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Gladstone Commercial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Commercial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Gladstone Commercial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Automatic Data and Gladstone Commercial

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

The idea behind Automatic Data Processing and Gladstone Commercial 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.