Correlation Between CoreCivic and Automatic Data

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

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

Diversification Opportunities for CoreCivic and Automatic Data

-0.53

Correlation Coefficient

CoreCivic  Automatic Data

Excellent diversification

The 3 months correlation between CoreCivic and Automatic is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding CoreCivic 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 CoreCivic 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 CoreCivic 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 CoreCivic i.e., CoreCivic and Automatic Data go up and down completely randomly.

Pair Corralation between CoreCivic and Automatic Data

Considering the 90-day investment horizon CoreCivic is expected to generate 1.55 times more return on investment than Automatic Data. However, CoreCivic is 1.55 times more volatile than Automatic Data Processing. It trades about 0.05 of its potential returns per unit of risk. Automatic Data Processing is currently generating about -0.01 per unit of risk. If you would invest  2,087  in CoreCivic on January 27, 2025 and sell it today you would earn a total of  138.00  from holding CoreCivic or generate 6.61% return on investment over 90 days.

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

CoreCivic  vs.  Automatic Data Processing

CoreCivic

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CoreCivic are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, CoreCivic may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Automatic Data Processing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Automatic Data Processing has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with CoreCivic and Automatic Data

The main advantage of trading using opposite CoreCivic and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CoreCivic 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 CoreCivic 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.