Correlation Between Experian Plc and Automatic Data

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

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

Diversification Opportunities for Experian Plc and Automatic Data

0.77

Correlation Coefficient

Experian Plc  Automatic Data

Poor diversification

The 3 months correlation between Experian and Automatic is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Experian plc 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 Experian Plc 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 Experian plc 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 Experian Plc i.e., Experian Plc and Automatic Data go up and down completely randomly.

Pair Corralation between Experian Plc and Automatic Data

Assuming the 90 days horizon Experian plc is expected to generate 1.09 times more return on investment than Automatic Data. However, Experian Plc is 1.09 times more volatile than Automatic Data Processing. It trades about 0.04 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.0 per unit of risk. If you would invest  4,121  in Experian plc on December 30, 2024 and sell it today you would earn a total of  139.00  from holding Experian plc or generate 3.37% return on investment over 90 days.

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

Experian plc  vs.  Automatic Data Processing

Experian plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Experian plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Experian Plc is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Automatic Data Processing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Automatic Data Processing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Automatic Data is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Experian Plc and Automatic Data

The main advantage of trading using opposite Experian Plc and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Experian Plc 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 Experian plc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.