Correlation Between Dell Technologies and Paycom Software

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

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

Diversification Opportunities for Dell Technologies and Paycom Software

0.72

Correlation Coefficient

Dell Technologies  Paycom Software

Poor diversification

The 3 months correlation between Dell and Paycom is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Dell Technologies and Paycom Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paycom Software and Dell Technologies 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 Dell Technologies are associated (or correlated) with Paycom Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paycom Software has no effect on the direction of Dell Technologies i.e., Dell Technologies and Paycom Software go up and down completely randomly.

Pair Corralation between Dell Technologies and Paycom Software

Assuming the 90 days trading horizon Dell Technologies is expected to generate 1.93 times more return on investment than Paycom Software. However, Dell Technologies is 1.93 times more volatile than Paycom Software. It trades about -0.06 of its potential returns per unit of risk. Paycom Software is currently generating about -0.17 per unit of risk. If you would invest  73,562  in Dell Technologies on November 28, 2024 and sell it today you would lose (9,637) from holding Dell Technologies or give up 13.1% of portfolio value over 90 days.

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

Dell Technologies  vs.  Paycom Software

Dell Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dell Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Paycom Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paycom Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dell Technologies and Paycom Software

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

The idea behind Dell Technologies and Paycom Software 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.