Correlation Between Triad Group and Automatic Data

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

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

Diversification Opportunities for Triad Group and Automatic Data

0.66

Correlation Coefficient

Triad Group  Automatic Data

Poor diversification

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

Pair Corralation between Triad Group and Automatic Data

Assuming the 90 days trading horizon Triad Group is expected to generate 1.08 times less return on investment than Automatic Data. But when comparing it to its historical volatility, Triad Group PLC is 3.28 times less risky than Automatic Data. It trades about 0.13 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  22,278  in Automatic Data Processing on September 23, 2024 and sell it today you would earn a total of  7,109  from holding Automatic Data Processing or generate 31.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.63%
Values	Daily Returns

Triad Group PLC  vs.  Automatic Data Processing

Triad Group PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Triad Group PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Triad Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Automatic Data Processing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Automatic Data may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Triad Group and Automatic Data

The main advantage of trading using opposite Triad Group and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Triad Group 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 Triad Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.