Correlation Between Paycom Soft and IShares NASDAQ

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

By analyzing existing cross correlation between Paycom Soft and iShares NASDAQ 100, you can compare the effects of market volatilities on Paycom Soft and IShares NASDAQ 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 IShares NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paycom Soft and IShares NASDAQ.

Diversification Opportunities for Paycom Soft and IShares NASDAQ

0.74

Correlation Coefficient

Paycom Soft  IShares NASDAQ

Poor diversification

The 3 months correlation between Paycom and IShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Soft and iShares NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares NASDAQ 100 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 IShares NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares NASDAQ 100 has no effect on the direction of Paycom Soft i.e., Paycom Soft and IShares NASDAQ go up and down completely randomly.

Pair Corralation between Paycom Soft and IShares NASDAQ

Given the investment horizon of 90 days Paycom Soft is expected to generate 1.95 times more return on investment than IShares NASDAQ. However, Paycom Soft is 1.95 times more volatile than iShares NASDAQ 100. It trades about 0.21 of its potential returns per unit of risk. iShares NASDAQ 100 is currently generating about 0.28 per unit of risk. If you would invest  21,112  in Paycom Soft on September 5, 2024 and sell it today you would earn a total of  1,876  from holding Paycom Soft or generate 8.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Paycom Soft  vs.  iShares NASDAQ 100

Paycom Soft

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Soft are ranked lower than 16 (%) 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.

iShares NASDAQ 100

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares NASDAQ 100 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares NASDAQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Paycom Soft and IShares NASDAQ

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

The idea behind Paycom Soft and iShares NASDAQ 100 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.