Correlation Between Automatic Data and Ke Holdings

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

Diversification Opportunities for Automatic Data and Ke Holdings

0.4

Correlation Coefficient

Automatic Data  Ke Holdings

Very weak diversification

The 3 months correlation between Automatic and BEKE is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Ke Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ke Holdings 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 Ke Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ke Holdings has no effect on the direction of Automatic Data i.e., Automatic Data and Ke Holdings go up and down completely randomly.

Pair Corralation between Automatic Data and Ke Holdings

Considering the 90-day investment horizon Automatic Data is expected to generate 4.24 times less return on investment than Ke Holdings. But when comparing it to its historical volatility, Automatic Data Processing is 3.41 times less risky than Ke Holdings. It trades about 0.05 of its potential returns per unit of risk. Ke Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,843  in Ke Holdings on December 28, 2024 and sell it today you would earn a total of  216.00  from holding Ke Holdings or generate 11.72% return on investment over 90 days.

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

Automatic Data Processing  vs.  Ke Holdings

Automatic Data Processing

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Automatic Data is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Ke Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ke Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward-looking signals, Ke Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Automatic Data and Ke Holdings

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

The idea behind Automatic Data Processing and Ke Holdings 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.