Correlation Between Automatic Data and Broadridge Financial

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

Diversification Opportunities for Automatic Data and Broadridge Financial

0.13

Correlation Coefficient

Automatic Data  Broadridge Financial

Average diversification

The 3 months correlation between Automatic and Broadridge is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Broadridge Financial Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadridge Financial 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 Broadridge Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadridge Financial has no effect on the direction of Automatic Data i.e., Automatic Data and Broadridge Financial go up and down completely randomly.

Pair Corralation between Automatic Data and Broadridge Financial

Considering the 90-day investment horizon Automatic Data Processing is expected to under-perform the Broadridge Financial. But the stock apears to be less risky and, when comparing its historical volatility, Automatic Data Processing is 1.38 times less risky than Broadridge Financial. The stock trades about -0.03 of its potential returns per unit of risk. The Broadridge Financial Solutions is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  19,714  in Broadridge Financial Solutions on February 16, 2024 and sell it today you would earn a total of  689.00  from holding Broadridge Financial Solutions or generate 3.49% return on investment over 90 days.

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

Automatic Data Processing  vs.  Broadridge Financial Solutions

Automatic Data Processing

Risk-Adjusted Performance

0 of 100

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.

Broadridge Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Broadridge Financial 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 Automatic Data and Broadridge Financial

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

The idea behind Automatic Data Processing and Broadridge Financial Solutions 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.