Correlation Between Automatic Data and Beyond Meat

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

Diversification Opportunities for Automatic Data and Beyond Meat

-0.61

Correlation Coefficient

Automatic Data  Beyond Meat

Excellent diversification

The 3 months correlation between Automatic and Beyond is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Beyond Meat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beyond Meat 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 Beyond Meat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beyond Meat has no effect on the direction of Automatic Data i.e., Automatic Data and Beyond Meat go up and down completely randomly.

Pair Corralation between Automatic Data and Beyond Meat

Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 0.4 times more return on investment than Beyond Meat. However, Automatic Data Processing is 2.52 times less risky than Beyond Meat. It trades about 0.19 of its potential returns per unit of risk. Beyond Meat is currently generating about -0.02 per unit of risk. If you would invest  6,404  in Automatic Data Processing on September 3, 2024 and sell it today you would earn a total of  1,252  from holding Automatic Data Processing or generate 19.55% 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.  Beyond Meat

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 somewhat weak basic indicators, Automatic Data sustained solid returns over the last few months and may actually be approaching a breakup point.

Beyond Meat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beyond Meat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Beyond Meat is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Automatic Data and Beyond Meat

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

The idea behind Automatic Data Processing and Beyond Meat 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.