Correlation Between Allianz Technology and Automatic Data

Can any of the company-specific risk be diversified away by investing in both Allianz Technology and Automatic Data 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 Allianz Technology and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Allianz Technology Trust and Automatic Data Processing, you can compare the effects of market volatilities on Allianz Technology and Automatic Data 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 Allianz Technology with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allianz Technology and Automatic Data.

Diversification Opportunities for Allianz Technology and Automatic Data

0.77

Correlation Coefficient

Allianz Technology  Automatic Data

Poor diversification

The 3 months correlation between Allianz and Automatic is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Allianz Technology Trust and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing and Allianz Technology 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 Allianz Technology Trust are associated (or correlated) with Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Allianz Technology i.e., Allianz Technology and Automatic Data go up and down completely randomly.

Pair Corralation between Allianz Technology and Automatic Data

Assuming the 90 days trading horizon Allianz Technology Trust is expected to generate 1.37 times more return on investment than Automatic Data. However, Allianz Technology is 1.37 times more volatile than Automatic Data Processing. It trades about 0.15 of its potential returns per unit of risk. Automatic Data Processing is currently generating about -0.13 per unit of risk. If you would invest  40,500  in Allianz Technology Trust on September 27, 2024 and sell it today you would earn a total of  1,600  from holding Allianz Technology Trust or generate 3.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Allianz Technology Trust  vs.  Automatic Data Processing

Allianz Technology Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allianz Technology Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Allianz Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Automatic Data Processing

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Automatic Data may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Allianz Technology and Automatic Data

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

The idea behind Allianz Technology Trust and Automatic Data Processing 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.