Correlation Between Paycom Soft and First National

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

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

Diversification Opportunities for Paycom Soft and First National

0.88

Correlation Coefficient

Paycom Soft  First National

Very poor diversification

The 3 months correlation between Paycom and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Soft and First National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Financial and Paycom Soft 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 Soft are associated (or correlated) with First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Financial has no effect on the direction of Paycom Soft i.e., Paycom Soft and First National go up and down completely randomly.

Pair Corralation between Paycom Soft and First National

Given the investment horizon of 90 days Paycom Soft is expected to generate 3.64 times more return on investment than First National. However, Paycom Soft is 3.64 times more volatile than First National Financial. It trades about 0.2 of its potential returns per unit of risk. First National Financial is currently generating about 0.37 per unit of risk. If you would invest  16,103  in Paycom Soft on September 3, 2024 and sell it today you would earn a total of  7,089  from holding Paycom Soft or generate 44.02% return on investment over 90 days.

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

Paycom Soft  vs.  First National Financial

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.

First National Financial

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, First National displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paycom Soft and First National

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

The idea behind Paycom Soft and First National Financial 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.