Correlation Between MidCap Financial and Automatic Data

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Can any of the company-specific risk be diversified away by investing in both MidCap Financial 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 MidCap Financial and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MidCap Financial Investment and Automatic Data Processing, you can compare the effects of market volatilities on MidCap Financial 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 MidCap Financial with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidCap Financial and Automatic Data.

Diversification Opportunities for MidCap Financial and Automatic Data

0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between MidCap and Automatic is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment 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 MidCap Financial 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 MidCap Financial Investment 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 MidCap Financial i.e., MidCap Financial and Automatic Data go up and down completely randomly.

Pair Corralation between MidCap Financial and Automatic Data

Assuming the 90 days trading horizon MidCap Financial Investment is expected to generate 1.09 times more return on investment than Automatic Data. However, MidCap Financial is 1.09 times more volatile than Automatic Data Processing. It trades about 0.1 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.02 per unit of risk. If you would invest  1,020  in MidCap Financial Investment on April 25, 2025 and sell it today you would earn a total of  90.00  from holding MidCap Financial Investment or generate 8.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

MidCap Financial Investment  vs.  Automatic Data Processing

 Performance 
       Timeline  
MidCap Financial Inv 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MidCap Financial may actually be approaching a critical reversion point that can send shares even higher in August 2025.
Automatic Data Processing 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Automatic Data is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MidCap Financial and Automatic Data Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MidCap Financial and Automatic Data

The main advantage of trading using opposite MidCap Financial and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MidCap Financial 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 MidCap Financial Investment 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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