Correlation Between Automatic Data and BrightView Holdings

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

Diversification Opportunities for Automatic Data and BrightView Holdings

-0.09

Correlation Coefficient

Automatic Data  BrightView Holdings

Good diversification

The 3 months correlation between Automatic and BrightView is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and BrightView Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrightView Holdings 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 BrightView Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrightView Holdings has no effect on the direction of Automatic Data i.e., Automatic Data and BrightView Holdings go up and down completely randomly.

Pair Corralation between Automatic Data and BrightView Holdings

Considering the 90-day investment horizon Automatic Data Processing is expected to generate 0.62 times more return on investment than BrightView Holdings. However, Automatic Data Processing is 1.61 times less risky than BrightView Holdings. It trades about 0.04 of its potential returns per unit of risk. BrightView Holdings is currently generating about -0.11 per unit of risk. If you would invest  29,014  in Automatic Data Processing on January 14, 2025 and sell it today you would earn a total of  940.00  from holding Automatic Data Processing or generate 3.24% return on investment over 90 days.

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

Automatic Data Processing  vs.  BrightView Holdings

Automatic Data Processing

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Automatic Data is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

BrightView Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days BrightView Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in May 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Automatic Data and BrightView Holdings

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

The idea behind Automatic Data Processing and BrightView Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.