Correlation Between Automatic Data and Adecco Group

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

Diversification Opportunities for Automatic Data and Adecco Group

-0.71

Correlation Coefficient

Automatic Data  Adecco Group

Pay attention - limited upside

The 3 months correlation between Automatic and Adecco is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Adecco Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adecco Group AG 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 Adecco Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adecco Group AG has no effect on the direction of Automatic Data i.e., Automatic Data and Adecco Group go up and down completely randomly.

Pair Corralation between Automatic Data and Adecco Group

Considering the 90-day investment horizon Automatic Data Processing is expected to generate 0.45 times more return on investment than Adecco Group. However, Automatic Data Processing is 2.24 times less risky than Adecco Group. It trades about 0.18 of its potential returns per unit of risk. Adecco Group AG is currently generating about -0.15 per unit of risk. If you would invest  27,416  in Automatic Data Processing on September 3, 2024 and sell it today you would earn a total of  3,277  from holding Automatic Data Processing or generate 11.95% return on investment over 90 days.

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

Automatic Data Processing  vs.  Adecco Group AG

Automatic Data Processing

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental indicators, Automatic Data may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Adecco Group AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adecco Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Automatic Data and Adecco Group

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

The idea behind Automatic Data Processing and Adecco Group AG 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.