Correlation Between Amkor Technology and Automatic Data

Can any of the company-specific risk be diversified away by investing in both Amkor Technology and Automatic Data 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 Amkor Technology and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amkor Technology and Automatic Data Processing, you can compare the effects of market volatilities on Amkor Technology and Automatic Data 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 Amkor Technology with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amkor Technology and Automatic Data.

Diversification Opportunities for Amkor Technology and Automatic Data

-0.67

Correlation Coefficient

Amkor Technology  Automatic Data

Excellent diversification

The 3 months correlation between Amkor and Automatic is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Amkor Technology and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing and Amkor Technology 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 Amkor Technology are associated (or correlated) with Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Amkor Technology i.e., Amkor Technology and Automatic Data go up and down completely randomly.

Pair Corralation between Amkor Technology and Automatic Data

Assuming the 90 days horizon Amkor Technology is expected to generate 1.92 times less return on investment than Automatic Data. In addition to that, Amkor Technology is 2.57 times more volatile than Automatic Data Processing. It trades about 0.02 of its total potential returns per unit of risk. Automatic Data Processing is currently generating about 0.08 per unit of volatility. If you would invest  19,721  in Automatic Data Processing on September 30, 2024 and sell it today you would earn a total of  8,619  from holding Automatic Data Processing or generate 43.7% return on investment over 90 days.

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

Amkor Technology  vs.  Automatic Data Processing

Amkor Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amkor Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Automatic Data Processing

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Automatic Data reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amkor Technology and Automatic Data

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

The idea behind Amkor Technology and Automatic Data Processing 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.