Correlation Between CDT Environmental and Automatic Data

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

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

Diversification Opportunities for CDT Environmental and Automatic Data

-0.46

Correlation Coefficient

CDT Environmental  Automatic Data

Very good diversification

The 3 months correlation between CDT and Automatic is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding CDT Environmental 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 CDT Environmental 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 CDT Environmental 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 CDT Environmental i.e., CDT Environmental and Automatic Data go up and down completely randomly.

Pair Corralation between CDT Environmental and Automatic Data

Given the investment horizon of 90 days CDT Environmental Technology is expected to under-perform the Automatic Data. In addition to that, CDT Environmental is 8.98 times more volatile than Automatic Data Processing. It trades about -0.1 of its total potential returns per unit of risk. Automatic Data Processing is currently generating about 0.05 per unit of volatility. If you would invest  29,142  in Automatic Data Processing on December 28, 2024 and sell it today you would earn a total of  941.00  from holding Automatic Data Processing or generate 3.23% return on investment over 90 days.

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

CDT Environmental Technology  vs.  Automatic Data Processing

CDT Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days CDT Environmental Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Automatic Data Processing

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 4 (%) 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 CDT Environmental and Automatic Data

The main advantage of trading using opposite CDT Environmental and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDT Environmental 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 CDT Environmental 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.