Correlation Between Blackbaud and Tyler Technologies

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

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

Diversification Opportunities for Blackbaud and Tyler Technologies

0.64

Correlation Coefficient

Blackbaud  Tyler Technologies

Poor diversification

The 3 months correlation between Blackbaud and Tyler is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Blackbaud and Tyler Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyler Technologies and Blackbaud 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 Blackbaud are associated (or correlated) with Tyler Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tyler Technologies has no effect on the direction of Blackbaud i.e., Blackbaud and Tyler Technologies go up and down completely randomly.

Pair Corralation between Blackbaud and Tyler Technologies

Given the investment horizon of 90 days Blackbaud is expected to generate 1.05 times more return on investment than Tyler Technologies. However, Blackbaud is 1.05 times more volatile than Tyler Technologies. It trades about 0.08 of its potential returns per unit of risk. Tyler Technologies is currently generating about 0.07 per unit of risk. If you would invest  4,501  in Blackbaud on June 22, 2024 and sell it today you would earn a total of  4,068  from holding Blackbaud or generate 90.38% return on investment over 90 days.

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

Blackbaud  vs.  Tyler Technologies

Blackbaud

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackbaud are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal forward-looking signals, Blackbaud sustained solid returns over the last few months and may actually be approaching a breakup point.

Tyler Technologies

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tyler Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Tyler Technologies disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blackbaud and Tyler Technologies

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

The idea behind Blackbaud and Tyler 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.