Correlation Between Model N and Paycor HCM

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

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

Diversification Opportunities for Model N and Paycor HCM

0.3

Correlation Coefficient

Model N  Paycor HCM

Weak diversification

The 3 months correlation between Model and Paycor is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Model N and Paycor HCM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paycor HCM and Model N 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 Model N are associated (or correlated) with Paycor HCM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paycor HCM has no effect on the direction of Model N i.e., Model N and Paycor HCM go up and down completely randomly.

Pair Corralation between Model N and Paycor HCM

Given the investment horizon of 90 days Model N is expected to generate 13.97 times less return on investment than Paycor HCM. But when comparing it to its historical volatility, Model N is 41.48 times less risky than Paycor HCM. It trades about 0.48 of its potential returns per unit of risk. Paycor HCM is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,210  in Paycor HCM on August 31, 2024 and sell it today you would earn a total of  596.00  from holding Paycor HCM or generate 49.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	14.17%
Values	Daily Returns

Model N  vs.  Paycor HCM

Model N

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Model N has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Model N is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Paycor HCM

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Paycor HCM are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Paycor HCM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Model N and Paycor HCM

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

The idea behind Model N and Paycor HCM 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.