Correlation Between Automatic Data and Linedata Services

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

Diversification Opportunities for Automatic Data and Linedata Services

-0.03

Correlation Coefficient

Automatic Data  Linedata Services

Good diversification

The 3 months correlation between Automatic and Linedata is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Linedata Services SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linedata 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 Linedata Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linedata Services has no effect on the direction of Automatic Data i.e., Automatic Data and Linedata Services go up and down completely randomly.

Pair Corralation between Automatic Data and Linedata Services

Assuming the 90 days horizon Automatic Data Processing is expected to under-perform the Linedata Services. But the stock apears to be less risky and, when comparing its historical volatility, Automatic Data Processing is 1.13 times less risky than Linedata Services. The stock trades about -0.04 of its potential returns per unit of risk. The Linedata Services SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  8,100  in Linedata Services SA on December 23, 2024 and sell it today you would lose (240.00) from holding Linedata Services SA or give up 2.96% of portfolio value over 90 days.

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

Automatic Data Processing  vs.  Linedata Services SA

Automatic Data Processing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Automatic Data Processing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Automatic Data is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Linedata Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Linedata Services SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Linedata Services is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Automatic Data and Linedata Services

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

The idea behind Automatic Data Processing and Linedata Services SA 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.