Correlation Between Open Text and Paycom Soft

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

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

Diversification Opportunities for Open Text and Paycom Soft

-0.86

Correlation Coefficient

Open Text  Paycom Soft

Pay attention - limited upside

The 3 months correlation between Open and Paycom is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Open Text Corp and Paycom Soft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paycom Soft and Open Text 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 Open Text Corp are associated (or correlated) with Paycom Soft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paycom Soft has no effect on the direction of Open Text i.e., Open Text and Paycom Soft go up and down completely randomly.

Pair Corralation between Open Text and Paycom Soft

Given the investment horizon of 90 days Open Text Corp is expected to under-perform the Paycom Soft. But the stock apears to be less risky and, when comparing its historical volatility, Open Text Corp is 1.58 times less risky than Paycom Soft. The stock trades about -0.02 of its potential returns per unit of risk. The Paycom Soft is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  16,251  in Paycom Soft on August 30, 2024 and sell it today you would earn a total of  7,248  from holding Paycom Soft or generate 44.6% return on investment over 90 days.

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

Open Text Corp  vs.  Paycom Soft

Open Text Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Open Text Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Open Text is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Paycom Soft

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Soft are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Paycom Soft exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Open Text and Paycom Soft

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

The idea behind Open Text Corp and Paycom Soft 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.