Correlation Between Schweiter Technologies and Automatic Data

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

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

Diversification Opportunities for Schweiter Technologies and Automatic Data

0.17

Correlation Coefficient

Schweiter Technologies  Automatic Data

Average diversification

The 3 months correlation between Schweiter and Automatic is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Schweiter Technologies AG 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 Schweiter Technologies 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 Schweiter Technologies AG 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 Schweiter Technologies i.e., Schweiter Technologies and Automatic Data go up and down completely randomly.

Pair Corralation between Schweiter Technologies and Automatic Data

Assuming the 90 days trading horizon Schweiter Technologies AG is expected to under-perform the Automatic Data. But the stock apears to be less risky and, when comparing its historical volatility, Schweiter Technologies AG is 3.39 times less risky than Automatic Data. The stock trades about -0.06 of its potential returns per unit of risk. The Automatic Data Processing is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  22,864  in Automatic Data Processing on October 15, 2024 and sell it today you would earn a total of  5,982  from holding Automatic Data Processing or generate 26.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Schweiter Technologies AG  vs.  Automatic Data Processing

Schweiter Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Schweiter Technologies AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Schweiter Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Automatic Data Processing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Automatic Data Processing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Automatic Data is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Schweiter Technologies and Automatic Data

The main advantage of trading using opposite Schweiter Technologies and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schweiter Technologies 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 Schweiter Technologies AG 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.