Correlation Between Automatic Data and T Mobile

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

Diversification Opportunities for Automatic Data and T Mobile

-0.25

Correlation Coefficient

Automatic Data  T Mobile

Very good diversification

The 3 months correlation between Automatic and T1MU34 is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and T Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Mobile 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 T Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Mobile has no effect on the direction of Automatic Data i.e., Automatic Data and T Mobile go up and down completely randomly.

Pair Corralation between Automatic Data and T Mobile

Assuming the 90 days trading horizon Automatic Data Processing is expected to under-perform the T Mobile. But the stock apears to be less risky and, when comparing its historical volatility, Automatic Data Processing is 1.52 times less risky than T Mobile. The stock trades about -0.07 of its potential returns per unit of risk. The T Mobile is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  68,980  in T Mobile on December 26, 2024 and sell it today you would earn a total of  4,923  from holding T Mobile or generate 7.14% return on investment over 90 days.

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

Automatic Data Processing  vs.  T Mobile

Automatic Data Processing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Automatic Data Processing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Automatic Data is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

T Mobile

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, T Mobile may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Automatic Data and T Mobile

The main advantage of trading using opposite Automatic Data and T Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, T Mobile 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 T Mobile will offset losses from the drop in T Mobile's long position.

The idea behind Automatic Data Processing and T Mobile 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.