Correlation Between Hudson Global and Paychex

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

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

Diversification Opportunities for Hudson Global and Paychex

-0.2

Correlation Coefficient

Hudson Global  Paychex

Good diversification

The 3 months correlation between Hudson and Paychex is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Global and Paychex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paychex and Hudson Global 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 Hudson Global are associated (or correlated) with Paychex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paychex has no effect on the direction of Hudson Global i.e., Hudson Global and Paychex go up and down completely randomly.

Pair Corralation between Hudson Global and Paychex

Given the investment horizon of 90 days Hudson Global is expected to under-perform the Paychex. In addition to that, Hudson Global is 2.14 times more volatile than Paychex. It trades about -0.09 of its total potential returns per unit of risk. Paychex is currently generating about 0.14 per unit of volatility. If you would invest  13,106  in Paychex on September 3, 2024 and sell it today you would earn a total of  1,521  from holding Paychex or generate 11.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Hudson Global  vs.  Paychex

Hudson Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hudson Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Paychex

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Paychex are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Paychex may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hudson Global and Paychex

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

The idea behind Hudson Global and Paychex 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.