Correlation Between Automatic Data and Batm Advanced

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

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

Diversification Opportunities for Automatic Data and Batm Advanced

-0.72

Correlation Coefficient

Automatic Data  Batm Advanced

Pay attention - limited upside

The 3 months correlation between Automatic and Batm is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Batm Advanced Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Batm Advanced Commun and Automatic Data 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 Automatic Data Processing are associated (or correlated) with Batm Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Batm Advanced Commun has no effect on the direction of Automatic Data i.e., Automatic Data and Batm Advanced go up and down completely randomly.

Pair Corralation between Automatic Data and Batm Advanced

Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 2.16 times more return on investment than Batm Advanced. However, Automatic Data is 2.16 times more volatile than Batm Advanced Communications. It trades about 0.03 of its potential returns per unit of risk. Batm Advanced Communications is currently generating about -0.01 per unit of risk. If you would invest  24,161  in Automatic Data Processing on September 14, 2024 and sell it today you would earn a total of  5,851  from holding Automatic Data Processing or generate 24.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.4%
Values	Daily Returns

Automatic Data Processing  vs.  Batm Advanced Communications

Automatic Data Processing

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 9 (%) 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.

Batm Advanced Commun

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Batm Advanced Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Batm Advanced is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Automatic Data and Batm Advanced

The main advantage of trading using opposite Automatic Data and Batm Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Batm Advanced 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 Batm Advanced will offset losses from the drop in Batm Advanced's long position.

The idea behind Automatic Data Processing and Batm Advanced Communications 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.