Correlation Between Automatic Data and ASPEN TECHINC

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

Diversification Opportunities for Automatic Data and ASPEN TECHINC

0.88

Correlation Coefficient

Automatic Data  ASPEN TECHINC

Very poor diversification

The 3 months correlation between Automatic and ASPEN is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and ASPEN TECHINC DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASPEN TECHINC DL 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 ASPEN TECHINC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASPEN TECHINC DL has no effect on the direction of Automatic Data i.e., Automatic Data and ASPEN TECHINC go up and down completely randomly.

Pair Corralation between Automatic Data and ASPEN TECHINC

Assuming the 90 days horizon Automatic Data Processing is expected to under-perform the ASPEN TECHINC. In addition to that, Automatic Data is 1.93 times more volatile than ASPEN TECHINC DL. It trades about -0.17 of its total potential returns per unit of risk. ASPEN TECHINC DL is currently generating about 0.15 per unit of volatility. If you would invest  23,600  in ASPEN TECHINC DL on October 12, 2024 and sell it today you would earn a total of  400.00  from holding ASPEN TECHINC DL or generate 1.69% return on investment over 90 days.

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

Automatic Data Processing  vs.  ASPEN TECHINC DL

Automatic Data Processing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Automatic Data is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

ASPEN TECHINC DL

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ASPEN TECHINC DL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ASPEN TECHINC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Automatic Data and ASPEN TECHINC

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

The idea behind Automatic Data Processing and ASPEN TECHINC DL 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.