Correlation Between Automatic Data and Zebra Technologies

Can any of the company-specific risk be diversified away by investing in both Automatic Data and Zebra Technologies 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 Zebra Technologies 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 Zebra Technologies, you can compare the effects of market volatilities on Automatic Data and Zebra Technologies 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 Zebra Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Zebra Technologies.

Diversification Opportunities for Automatic Data and Zebra Technologies

0.94

Correlation Coefficient

Automatic Data  Zebra Technologies

Almost no diversification

The 3 months correlation between Automatic and Zebra is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Zebra Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zebra Technologies 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 Zebra Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zebra Technologies has no effect on the direction of Automatic Data i.e., Automatic Data and Zebra Technologies go up and down completely randomly.

Pair Corralation between Automatic Data and Zebra Technologies

Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 0.88 times more return on investment than Zebra Technologies. However, Automatic Data Processing is 1.13 times less risky than Zebra Technologies. It trades about 0.24 of its potential returns per unit of risk. Zebra Technologies is currently generating about 0.2 per unit of risk. If you would invest  6,234  in Automatic Data Processing on October 8, 2024 and sell it today you would earn a total of  1,318  from holding Automatic Data Processing or generate 21.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.61%
Values	Daily Returns

Automatic Data Processing  vs.  Zebra Technologies

Automatic Data Processing

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Automatic Data sustained solid returns over the last few months and may actually be approaching a breakup point.

Zebra Technologies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zebra Technologies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Zebra Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Automatic Data and Zebra Technologies

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

The idea behind Automatic Data Processing and Zebra Technologies 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.