Correlation Between ESGL Holdings and Automatic Data

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

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

Diversification Opportunities for ESGL Holdings and Automatic Data

-0.51

Correlation Coefficient

ESGL Holdings  Automatic Data

Excellent diversification

The 3 months correlation between ESGL and Automatic is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding ESGL Holdings Limited 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 ESGL Holdings 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 ESGL Holdings Limited 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 ESGL Holdings i.e., ESGL Holdings and Automatic Data go up and down completely randomly.

Pair Corralation between ESGL Holdings and Automatic Data

Assuming the 90 days horizon ESGL Holdings Limited is expected to generate 14.73 times more return on investment than Automatic Data. However, ESGL Holdings is 14.73 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 0.08 per unit of risk. If you would invest  1.34  in ESGL Holdings Limited on December 29, 2024 and sell it today you would lose (0.21) from holding ESGL Holdings Limited or give up 15.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	72.13%
Values	Daily Returns

ESGL Holdings Limited  vs.  Automatic Data Processing

ESGL Holdings Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ESGL Holdings Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, ESGL Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

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 6 (%) 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 ESGL Holdings and Automatic Data

The main advantage of trading using opposite ESGL Holdings and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESGL Holdings 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 ESGL Holdings Limited 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.