Correlation Between Automatic Data and MUTUIONLINE

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

Diversification Opportunities for Automatic Data and MUTUIONLINE

0.76

Correlation Coefficient

Automatic Data  MUTUIONLINE

Poor diversification

The 3 months correlation between Automatic and MUTUIONLINE is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and MUTUIONLINE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MUTUIONLINE 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 MUTUIONLINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MUTUIONLINE has no effect on the direction of Automatic Data i.e., Automatic Data and MUTUIONLINE go up and down completely randomly.

Pair Corralation between Automatic Data and MUTUIONLINE

Assuming the 90 days horizon Automatic Data is expected to generate 1.36 times less return on investment than MUTUIONLINE. But when comparing it to its historical volatility, Automatic Data Processing is 1.57 times less risky than MUTUIONLINE. It trades about 0.05 of its potential returns per unit of risk. MUTUIONLINE is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,682  in MUTUIONLINE on September 26, 2024 and sell it today you would earn a total of  1,073  from holding MUTUIONLINE or generate 40.01% return on investment over 90 days.

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

Automatic Data Processing  vs.  MUTUIONLINE

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.

MUTUIONLINE

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MUTUIONLINE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, MUTUIONLINE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Automatic Data and MUTUIONLINE

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

The idea behind Automatic Data Processing and MUTUIONLINE 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.