Correlation Between Automatic Data and Foresight Group

Can any of the company-specific risk be diversified away by investing in both Automatic Data and Foresight Group 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 Foresight Group 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 Foresight Group Holdings, you can compare the effects of market volatilities on Automatic Data and Foresight Group 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 Foresight Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Foresight Group.

Diversification Opportunities for Automatic Data and Foresight Group

-0.87

Correlation Coefficient

Automatic Data  Foresight Group

Pay attention - limited upside

The 3 months correlation between Automatic and Foresight is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Foresight Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foresight Group Holdings 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 Foresight Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foresight Group Holdings has no effect on the direction of Automatic Data i.e., Automatic Data and Foresight Group go up and down completely randomly.

Pair Corralation between Automatic Data and Foresight Group

Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 0.57 times more return on investment than Foresight Group. However, Automatic Data Processing is 1.74 times less risky than Foresight Group. It trades about 0.1 of its potential returns per unit of risk. Foresight Group Holdings is currently generating about -0.18 per unit of risk. If you would invest  27,865  in Automatic Data Processing on September 17, 2024 and sell it today you would earn a total of  1,829  from holding Automatic Data Processing or generate 6.56% return on investment over 90 days.

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

Automatic Data Processing  vs.  Foresight Group Holdings

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.

Foresight Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foresight Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Automatic Data and Foresight Group

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

The idea behind Automatic Data Processing and Foresight Group Holdings 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.