Correlation Between Paycom Software and Waste Management

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

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

Diversification Opportunities for Paycom Software and Waste Management

0.85

Correlation Coefficient

Paycom Software  Waste Management

Very poor diversification

The 3 months correlation between Paycom and Waste is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Software and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Paycom Software i.e., Paycom Software and Waste Management go up and down completely randomly.

Pair Corralation between Paycom Software and Waste Management

Assuming the 90 days trading horizon Paycom Software is expected to generate 2.88 times more return on investment than Waste Management. However, Paycom Software is 2.88 times more volatile than Waste Management. It trades about 0.18 of its potential returns per unit of risk. Waste Management is currently generating about 0.14 per unit of risk. If you would invest  3,014  in Paycom Software on September 2, 2024 and sell it today you would earn a total of  1,583  from holding Paycom Software or generate 52.52% return on investment over 90 days.

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

Paycom Software  vs.  Waste Management

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.

Waste Management

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, Waste Management sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paycom Software and Waste Management

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

The idea behind Paycom Software and Waste Management 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.