Correlation Between Automatic Data and SAXLUND GROUP

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

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

Diversification Opportunities for Automatic Data and SAXLUND GROUP

0.24

Correlation Coefficient

Automatic Data  SAXLUND GROUP

Modest diversification

The 3 months correlation between Automatic and SAXLUND is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and SAXLUND GROUP AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAXLUND GROUP AB and Automatic Data 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 Automatic Data Processing are associated (or correlated) with SAXLUND GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAXLUND GROUP AB has no effect on the direction of Automatic Data i.e., Automatic Data and SAXLUND GROUP go up and down completely randomly.

Pair Corralation between Automatic Data and SAXLUND GROUP

Assuming the 90 days horizon Automatic Data Processing is expected to under-perform the SAXLUND GROUP. But the stock apears to be less risky and, when comparing its historical volatility, Automatic Data Processing is 21.72 times less risky than SAXLUND GROUP. The stock trades about -0.04 of its potential returns per unit of risk. The SAXLUND GROUP AB is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  20.00  in SAXLUND GROUP AB on December 22, 2024 and sell it today you would earn a total of  61.00  from holding SAXLUND GROUP AB or generate 305.0% return on investment over 90 days.

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

Automatic Data Processing  vs.  SAXLUND GROUP AB

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 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.

SAXLUND GROUP AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SAXLUND GROUP AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, SAXLUND GROUP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Automatic Data and SAXLUND GROUP

The main advantage of trading using opposite Automatic Data and SAXLUND GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, SAXLUND GROUP 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 SAXLUND GROUP will offset losses from the drop in SAXLUND GROUP's long position.

The idea behind Automatic Data Processing and SAXLUND GROUP AB 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.