Correlation Between Paychex and Equifax

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

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

Diversification Opportunities for Paychex and Equifax

-0.68

Correlation Coefficient

Paychex  Equifax

Excellent diversification

The 3 months correlation between Paychex and Equifax is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Paychex and Equifax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equifax and Paychex 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 Paychex are associated (or correlated) with Equifax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equifax has no effect on the direction of Paychex i.e., Paychex and Equifax go up and down completely randomly.

Pair Corralation between Paychex and Equifax

Assuming the 90 days horizon Paychex is expected to under-perform the Equifax. But the stock apears to be less risky and, when comparing its historical volatility, Paychex is 1.34 times less risky than Equifax. The stock trades about -0.05 of its potential returns per unit of risk. The Equifax is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  23,561  in Equifax on September 18, 2024 and sell it today you would earn a total of  1,839  from holding Equifax or generate 7.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Paychex  vs.  Equifax

Paychex

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Paychex are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Paychex may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Equifax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equifax has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Equifax is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Paychex and Equifax

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

The idea behind Paychex and Equifax 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.