Correlation Between Automatic Data and Fair Isaac

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

Diversification Opportunities for Automatic Data and Fair Isaac

0.94

Correlation Coefficient

Automatic Data  Fair Isaac

Almost no diversification

The 3 months correlation between Automatic and Fair is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Fair Isaac Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac 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 Fair Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac Corp has no effect on the direction of Automatic Data i.e., Automatic Data and Fair Isaac go up and down completely randomly.

Pair Corralation between Automatic Data and Fair Isaac

Assuming the 90 days horizon Automatic Data is expected to generate 1.12 times less return on investment than Fair Isaac. But when comparing it to its historical volatility, Automatic Data Processing is 1.91 times less risky than Fair Isaac. It trades about 0.18 of its potential returns per unit of risk. Fair Isaac Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  175,450  in Fair Isaac Corp on September 23, 2024 and sell it today you would earn a total of  25,250  from holding Fair Isaac Corp or generate 14.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Automatic Data Processing  vs.  Fair Isaac Corp

Automatic Data Processing

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 14 (%) 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.

Fair Isaac Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fair Isaac unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Automatic Data and Fair Isaac

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

The idea behind Automatic Data Processing and Fair Isaac 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.