Correlation Between Automatic Data and Sea

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

Diversification Opportunities for Automatic Data and Sea

0.66

Correlation Coefficient

Automatic Data  Sea

Poor diversification

The 3 months correlation between Automatic and Sea is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Sea Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Limited 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Limited has no effect on the direction of Automatic Data i.e., Automatic Data and Sea go up and down completely randomly.

Pair Corralation between Automatic Data and Sea

If you would invest  7,216  in Automatic Data Processing on October 7, 2024 and sell it today you would earn a total of  336.00  from holding Automatic Data Processing or generate 4.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	2.78%
Values	Daily Returns

Automatic Data Processing  vs.  Sea Limited

Automatic Data Processing

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Automatic Data sustained solid returns over the last few months and may actually be approaching a breakup point.

Sea Limited

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Sea Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak technical and fundamental indicators, Sea sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Automatic Data and Sea

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

The idea behind Automatic Data Processing and Sea Limited 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.