Correlation Between Paycom Software and A1DI34

Can any of the company-specific risk be diversified away by investing in both Paycom Software and A1DI34 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 Paycom Software and A1DI34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Paycom Software and A1DI34, you can compare the effects of market volatilities on Paycom Software and A1DI34 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 Paycom Software with a short position of A1DI34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paycom Software and A1DI34.

Diversification Opportunities for Paycom Software and A1DI34

0.48

Correlation Coefficient

Paycom Software  A1DI34

Very weak diversification

The 3 months correlation between Paycom and A1DI34 is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Software and A1DI34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A1DI34 and Paycom Software 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 Paycom Software are associated (or correlated) with A1DI34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A1DI34 has no effect on the direction of Paycom Software i.e., Paycom Software and A1DI34 go up and down completely randomly.

Pair Corralation between Paycom Software and A1DI34

Assuming the 90 days trading horizon Paycom Software is expected to generate 3.04 times more return on investment than A1DI34. However, Paycom Software is 3.04 times more volatile than A1DI34. It trades about 0.17 of its potential returns per unit of risk. A1DI34 is currently generating about 0.07 per unit of risk. If you would invest  3,105  in Paycom Software on September 26, 2024 and sell it today you would earn a total of  1,485  from holding Paycom Software or generate 47.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Paycom Software  vs.  A1DI34

Paycom Software

Risk-Adjusted Performance

13 of 100

Good

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

A1DI34

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in A1DI34 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, A1DI34 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Paycom Software and A1DI34

The main advantage of trading using opposite Paycom Software and A1DI34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paycom Software position performs unexpectedly, A1DI34 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 A1DI34 will offset losses from the drop in A1DI34's long position.

The idea behind Paycom Software and A1DI34 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..