Correlation Between A2Z Smart and Automatic Data

Can any of the company-specific risk be diversified away by investing in both A2Z Smart 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 A2Z Smart and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between A2Z Smart Technologies and Automatic Data Processing, you can compare the effects of market volatilities on A2Z Smart 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 A2Z Smart with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of A2Z Smart and Automatic Data.

Diversification Opportunities for A2Z Smart and Automatic Data

0.17

Correlation Coefficient

A2Z Smart  Automatic Data

Average diversification

The 3 months correlation between A2Z and Automatic is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding A2Z Smart Technologies 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 A2Z Smart 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 A2Z Smart Technologies 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 A2Z Smart i.e., A2Z Smart and Automatic Data go up and down completely randomly.

Pair Corralation between A2Z Smart and Automatic Data

Allowing for the 90-day total investment horizon A2Z Smart Technologies is expected to generate 4.49 times more return on investment than Automatic Data. However, A2Z Smart is 4.49 times more volatile than Automatic Data Processing. It trades about 0.05 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.05 per unit of risk. If you would invest  692.00  in A2Z Smart Technologies on November 28, 2024 and sell it today you would earn a total of  56.00  from holding A2Z Smart Technologies or generate 8.09% return on investment over 90 days.

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

A2Z Smart Technologies  vs.  Automatic Data Processing

A2Z Smart Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in A2Z Smart Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, A2Z Smart showed solid returns over the last few months and may actually be approaching a breakup point.

Automatic Data Processing

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 3 (%) 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.

Pair Trading with A2Z Smart and Automatic Data

The main advantage of trading using opposite A2Z Smart and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if A2Z Smart 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 A2Z Smart Technologies 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.