Correlation Between Canon Marketing and Automatic Data

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

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

Diversification Opportunities for Canon Marketing and Automatic Data

0.56

Correlation Coefficient

Canon Marketing  Automatic Data

Very weak diversification

The 3 months correlation between Canon and Automatic is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Canon Marketing Japan 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 Canon Marketing 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 Canon Marketing Japan 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 Canon Marketing i.e., Canon Marketing and Automatic Data go up and down completely randomly.

Pair Corralation between Canon Marketing and Automatic Data

Assuming the 90 days horizon Canon Marketing Japan is expected to generate 0.95 times more return on investment than Automatic Data. However, Canon Marketing Japan is 1.05 times less risky than Automatic Data. It trades about 0.19 of its potential returns per unit of risk. Automatic Data Processing is currently generating about -0.09 per unit of risk. If you would invest  3,000  in Canon Marketing Japan on September 30, 2024 and sell it today you would earn a total of  120.00  from holding Canon Marketing Japan or generate 4.0% return on investment over 90 days.

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

Canon Marketing Japan  vs.  Automatic Data Processing

Canon Marketing Japan

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canon Marketing Japan are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Canon Marketing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Automatic Data Processing

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 17 (%) 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.

Pair Trading with Canon Marketing and Automatic Data

The main advantage of trading using opposite Canon Marketing and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canon Marketing 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 Canon Marketing Japan 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.