Correlation Between Automatic Data and POWER METALS

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

Diversification Opportunities for Automatic Data and POWER METALS

0.2

Correlation Coefficient

Automatic Data  POWER METALS

Modest diversification

The 3 months correlation between Automatic and POWER is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and POWER METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POWER METALS 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 POWER METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POWER METALS has no effect on the direction of Automatic Data i.e., Automatic Data and POWER METALS go up and down completely randomly.

Pair Corralation between Automatic Data and POWER METALS

Assuming the 90 days horizon Automatic Data is expected to generate 2.4 times less return on investment than POWER METALS. But when comparing it to its historical volatility, Automatic Data Processing is 2.97 times less risky than POWER METALS. It trades about 0.15 of its potential returns per unit of risk. POWER METALS is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  26.00  in POWER METALS on October 6, 2024 and sell it today you would earn a total of  4.00  from holding POWER METALS or generate 15.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.5%
Values	Daily Returns

Automatic Data Processing  vs.  POWER METALS

Automatic Data Processing

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 12 (%) 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.

POWER METALS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in POWER METALS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, POWER METALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Automatic Data and POWER METALS

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

The idea behind Automatic Data Processing and POWER METALS 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.