Correlation Between Treasury Wine and Automatic Data

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

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

Diversification Opportunities for Treasury Wine and Automatic Data

-0.66

Correlation Coefficient

Treasury Wine  Automatic Data

Excellent diversification

The 3 months correlation between Treasury and Automatic is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates 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 Treasury Wine 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 Treasury Wine Estates 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 Treasury Wine i.e., Treasury Wine and Automatic Data go up and down completely randomly.

Pair Corralation between Treasury Wine and Automatic Data

Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the Automatic Data. In addition to that, Treasury Wine is 1.0 times more volatile than Automatic Data Processing. It trades about -0.11 of its total potential returns per unit of risk. Automatic Data Processing is currently generating about -0.06 per unit of volatility. If you would invest  28,694  in Automatic Data Processing on October 8, 2024 and sell it today you would lose (354.00) from holding Automatic Data Processing or give up 1.23% of portfolio value over 90 days.

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

Treasury Wine Estates  vs.  Automatic Data Processing

Treasury Wine Estates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Automatic Data Processing

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Automatic Data may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Treasury Wine and Automatic Data

The main advantage of trading using opposite Treasury Wine and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treasury Wine 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 Treasury Wine Estates 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.