Correlation Between Experian Plc and Paychex

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

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

Diversification Opportunities for Experian Plc and Paychex

-0.42

Correlation Coefficient

Experian Plc  Paychex

Very good diversification

The 3 months correlation between Experian and Paychex is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Experian plc and Paychex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paychex and Experian Plc 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 Experian plc 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 Experian Plc i.e., Experian Plc and Paychex go up and down completely randomly.

Pair Corralation between Experian Plc and Paychex

Assuming the 90 days horizon Experian plc is expected to under-perform the Paychex. But the stock apears to be less risky and, when comparing its historical volatility, Experian plc is 1.06 times less risky than Paychex. The stock trades about -0.04 of its potential returns per unit of risk. The Paychex is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  11,996  in Paychex on September 18, 2024 and sell it today you would earn a total of  1,406  from holding Paychex or generate 11.72% return on investment over 90 days.

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

Experian plc  vs.  Paychex

Experian plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Experian plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Experian Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite nearly unsteady basic indicators, Paychex may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Experian Plc and Paychex

The main advantage of trading using opposite Experian Plc and Paychex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Experian Plc 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 Experian plc 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.