Correlation Between Sabien Technology and Automatic Data

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

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

Diversification Opportunities for Sabien Technology and Automatic Data

0.21

Correlation Coefficient

Sabien Technology  Automatic Data

Modest diversification

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

Pair Corralation between Sabien Technology and Automatic Data

Assuming the 90 days trading horizon Sabien Technology Group is expected to under-perform the Automatic Data. But the stock apears to be less risky and, when comparing its historical volatility, Sabien Technology Group is 2.0 times less risky than Automatic Data. The stock trades about 0.0 of its potential returns per unit of risk. The Automatic Data Processing is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  20,919  in Automatic Data Processing on September 14, 2024 and sell it today you would earn a total of  9,093  from holding Automatic Data Processing or generate 43.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.25%
Values	Daily Returns

Sabien Technology Group  vs.  Automatic Data Processing

Sabien Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sabien Technology Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sabien Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Automatic Data Processing

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Automatic Data may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sabien Technology and Automatic Data

The main advantage of trading using opposite Sabien Technology and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabien Technology 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 Sabien Technology Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.