Correlation Between Insperity and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Insperity 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 Insperity and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insperity and Automatic Data Processing, you can compare the effects of market volatilities on Insperity 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 Insperity with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insperity and Automatic Data.
Diversification Opportunities for Insperity and Automatic Data
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Insperity and Automatic is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Insperity 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 Insperity 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 Insperity 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 Insperity i.e., Insperity and Automatic Data go up and down completely randomly.
Pair Corralation between Insperity and Automatic Data
Considering the 90-day investment horizon Insperity is expected to generate 1.4 times more return on investment than Automatic Data. However, Insperity is 1.4 times more volatile than Automatic Data Processing. It trades about 0.13 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.04 per unit of risk. If you would invest 10,563 in Insperity on January 26, 2024 and sell it today you would earn a total of 389.00 from holding Insperity or generate 3.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insperity vs. Automatic Data Processing
Performance |
| Timeline |
| Insperity |
| Automatic Data Processing |
Insperity and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insperity and Automatic Data
The main advantage of trading using opposite Insperity and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insperity 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 Insperity 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.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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