Correlation Between HCA Healthcare, and Paycom Software

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

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

Diversification Opportunities for HCA Healthcare, and Paycom Software

-0.75

Correlation Coefficient

HCA Healthcare,  Paycom Software

Pay attention - limited upside

The 3 months correlation between HCA and Paycom is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding HCA Healthcare, and Paycom Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paycom Software and HCA Healthcare, 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 HCA Healthcare, 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 HCA Healthcare, i.e., HCA Healthcare, and Paycom Software go up and down completely randomly.

Pair Corralation between HCA Healthcare, and Paycom Software

Assuming the 90 days trading horizon HCA Healthcare, is expected to under-perform the Paycom Software. But the stock apears to be less risky and, when comparing its historical volatility, HCA Healthcare, is 2.89 times less risky than Paycom Software. The stock trades about -0.09 of its potential returns per unit of risk. The Paycom Software is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,165  in Paycom Software on October 26, 2024 and sell it today you would earn a total of  1,016  from holding Paycom Software or generate 32.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

HCA Healthcare,  vs.  Paycom Software

HCA Healthcare,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCA Healthcare, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's 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

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Software are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Paycom Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HCA Healthcare, and Paycom Software

The main advantage of trading using opposite HCA Healthcare, and Paycom Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HCA Healthcare, 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 HCA Healthcare, 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.