Correlation Between Autodesk and Broadridge Financial

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

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

Diversification Opportunities for Autodesk and Broadridge Financial

0.47

Correlation Coefficient

Autodesk  Broadridge Financial

Very weak diversification

The 3 months correlation between Autodesk and Broadridge is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Autodesk and Broadridge Financial Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadridge Financial and Autodesk 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 Autodesk 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 Autodesk i.e., Autodesk and Broadridge Financial go up and down completely randomly.

Pair Corralation between Autodesk and Broadridge Financial

Given the investment horizon of 90 days Autodesk is expected to under-perform the Broadridge Financial. In addition to that, Autodesk is 1.87 times more volatile than Broadridge Financial Solutions. It trades about -0.47 of its total potential returns per unit of risk. Broadridge Financial Solutions is currently generating about -0.15 per unit of volatility. If you would invest  20,171  in Broadridge Financial Solutions on January 26, 2024 and sell it today you would lose (663.00) from holding Broadridge Financial Solutions or give up 3.29% of portfolio value over 90 days.

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

Autodesk  vs.  Broadridge Financial Solutions

Autodesk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Autodesk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Broadridge Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broadridge Financial Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Autodesk and Broadridge Financial

The main advantage of trading using opposite Autodesk and Broadridge Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autodesk 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 Autodesk 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 Anywhere module to track or share privately all of your investments from the convenience of any device.