Correlation Between Applied Digital and Accenture Plc

Can any of the company-specific risk be diversified away by investing in both Applied Digital and Accenture Plc 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 Applied Digital and Accenture Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Applied Digital and Accenture plc, you can compare the effects of market volatilities on Applied Digital and Accenture Plc 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 Applied Digital with a short position of Accenture Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Digital and Accenture Plc.

Diversification Opportunities for Applied Digital and Accenture Plc

0.21

Correlation Coefficient

Applied Digital  Accenture Plc

Modest diversification

The 3 months correlation between Applied and Accenture is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Applied Digital and Accenture plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accenture plc and Applied Digital 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 Applied Digital are associated (or correlated) with Accenture Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accenture plc has no effect on the direction of Applied Digital i.e., Applied Digital and Accenture Plc go up and down completely randomly.

Pair Corralation between Applied Digital and Accenture Plc

Given the investment horizon of 90 days Applied Digital is expected to under-perform the Accenture Plc. In addition to that, Applied Digital is 3.32 times more volatile than Accenture plc. It trades about -0.11 of its total potential returns per unit of risk. Accenture plc is currently generating about -0.04 per unit of volatility. If you would invest  35,706  in Accenture plc on October 15, 2024 and sell it today you would lose (727.00) from holding Accenture plc or give up 2.04% of portfolio value over 90 days.

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

Applied Digital  vs.  Accenture plc

Applied Digital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Digital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, Applied Digital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Accenture plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Accenture plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Accenture Plc is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Applied Digital and Accenture Plc

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

The idea behind Applied Digital and Accenture plc 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.