Correlation Between Automatic Data and Amazon

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

Diversification Opportunities for Automatic Data and Amazon

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Automatic and Amazon is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Automatic Data i.e., Automatic Data and Amazon go up and down completely randomly.

Pair Corralation between Automatic Data and Amazon

Considering the 90-day investment horizon Automatic Data Processing is expected to generate 0.61 times more return on investment than Amazon. However, Automatic Data Processing is 1.64 times less risky than Amazon. It trades about 0.07 of its potential returns per unit of risk. Amazon Inc is currently generating about -0.03 per unit of risk. If you would invest  17,007  in Automatic Data Processing on September 6, 2022 and sell it today you would earn a total of  9,432  from holding Automatic Data Processing or generate 55.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Automatic Data Processing  vs.  Amazon Inc

 Performance (%) 
       Timeline  
Automatic Data Processing 
Automatic Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Automatic Data may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Automatic Price Channel

Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Automatic Data and Amazon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Automatic Data and Amazon

The main advantage of trading using opposite Automatic Data and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.
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The idea behind Automatic Data Processing and Amazon Inc 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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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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