Correlation Between Energisa and Automatic Data

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

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

Diversification Opportunities for Energisa and Automatic Data

0.21

Correlation Coefficient

Energisa  Automatic Data

Modest diversification

The 3 months correlation between Energisa and Automatic is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA 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 Energisa 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 Energisa SA 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 Energisa i.e., Energisa and Automatic Data go up and down completely randomly.

Pair Corralation between Energisa and Automatic Data

Assuming the 90 days trading horizon Energisa SA is expected to generate 0.72 times more return on investment than Automatic Data. However, Energisa SA is 1.39 times less risky than Automatic Data. It trades about 0.06 of its potential returns per unit of risk. Automatic Data Processing is currently generating about -0.15 per unit of risk. If you would invest  4,650  in Energisa SA on April 9, 2025 and sell it today you would earn a total of  85.00  from holding Energisa SA or generate 1.83% return on investment over 90 days.

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

Energisa SA  vs.  Automatic Data Processing

Energisa SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energisa SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Energisa 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 Energisa and Automatic Data

The main advantage of trading using opposite Energisa and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa 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 Energisa SA 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 CEOs Directory module to screen CEOs from public companies around the world.