Correlation Between Automatic Data and Information Services

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

Diversification Opportunities for Automatic Data and Information Services

0.53

Correlation Coefficient

Automatic Data  Information Services

Very weak diversification

The 3 months correlation between Automatic and Information is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Information Services Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services 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 Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Automatic Data i.e., Automatic Data and Information Services go up and down completely randomly.

Pair Corralation between Automatic Data and Information Services

Assuming the 90 days horizon Automatic Data Processing is expected to generate 0.79 times more return on investment than Information Services. However, Automatic Data Processing is 1.27 times less risky than Information Services. It trades about 0.06 of its potential returns per unit of risk. Information Services International Dentsu is currently generating about -0.18 per unit of risk. If you would invest  28,305  in Automatic Data Processing on October 24, 2024 and sell it today you would earn a total of  355.00  from holding Automatic Data Processing or generate 1.25% return on investment over 90 days.

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

Automatic Data Processing  vs.  Information Services Internati

Automatic Data Processing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 8 (%) 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.

Information Services

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services International Dentsu are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Information Services may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Automatic Data and Information Services

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

The idea behind Automatic Data Processing and Information Services International Dentsu 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.