Correlation Between Automatic Data and WOODSIDE ENE

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

Diversification Opportunities for Automatic Data and WOODSIDE ENE

-0.53

Correlation Coefficient

Automatic Data  WOODSIDE ENE

Excellent diversification

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

Pair Corralation between Automatic Data and WOODSIDE ENE

Assuming the 90 days horizon Automatic Data Processing is expected to under-perform the WOODSIDE ENE. But the stock apears to be less risky and, when comparing its historical volatility, Automatic Data Processing is 3.04 times less risky than WOODSIDE ENE. The stock trades about -0.12 of its potential returns per unit of risk. The WOODSIDE ENE SPADR is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,450  in WOODSIDE ENE SPADR on September 29, 2024 and sell it today you would lose (30.00) from holding WOODSIDE ENE SPADR or give up 2.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Automatic Data Processing  vs.  WOODSIDE ENE SPADR

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

WOODSIDE ENE SPADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Automatic Data and WOODSIDE ENE

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

The idea behind Automatic Data Processing and WOODSIDE ENE SPADR 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.