Correlation Between Barclays PLC and Automatic Data

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

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

Diversification Opportunities for Barclays PLC and Automatic Data

0.15

Correlation Coefficient

Barclays PLC  Automatic Data

Average diversification

The 3 months correlation between Barclays and Automatic is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Barclays PLC 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 Barclays PLC 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 Barclays PLC 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 Barclays PLC i.e., Barclays PLC and Automatic Data go up and down completely randomly.

Pair Corralation between Barclays PLC and Automatic Data

Assuming the 90 days trading horizon Barclays PLC is expected to generate 0.94 times more return on investment than Automatic Data. However, Barclays PLC is 1.07 times less risky than Automatic Data. It trades about 0.21 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.0 per unit of risk. If you would invest  8,720  in Barclays PLC on April 20, 2025 and sell it today you would earn a total of  1,860  from holding Barclays PLC or generate 21.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Barclays PLC  vs.  Automatic Data Processing

Barclays PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Barclays PLC sustained solid returns over the last few months and may actually be approaching a breakup point.

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. Despite somewhat strong basic indicators, Automatic Data is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Barclays PLC and Automatic Data

The main advantage of trading using opposite Barclays PLC and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barclays PLC 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 Barclays PLC 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.