Correlation Between Automatic Data and Superior Plus

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

Diversification Opportunities for Automatic Data and Superior Plus

-0.78

Correlation Coefficient

Automatic Data  Superior Plus

Pay attention - limited upside

The 3 months correlation between Automatic and Superior is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Superior Plus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Plus Corp 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 Superior Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Plus Corp has no effect on the direction of Automatic Data i.e., Automatic Data and Superior Plus go up and down completely randomly.

Pair Corralation between Automatic Data and Superior Plus

Assuming the 90 days horizon Automatic Data is expected to generate 1.84 times less return on investment than Superior Plus. But when comparing it to its historical volatility, Automatic Data Processing is 2.25 times less risky than Superior Plus. It trades about 0.01 of its potential returns per unit of risk. Superior Plus Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  414.00  in Superior Plus Corp on September 18, 2024 and sell it today you would earn a total of  0.00  from holding Superior Plus Corp or generate 0.0% return on investment over 90 days.

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

Automatic Data Processing  vs.  Superior Plus Corp

Automatic Data Processing

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Automatic Data reported solid returns over the last few months and may actually be approaching a breakup point.

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Automatic Data and Superior Plus

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

The idea behind Automatic Data Processing and Superior Plus Corp 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.