Correlation Between Karooooo and Paycor HCM

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

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

Diversification Opportunities for Karooooo and Paycor HCM

-0.32

Correlation Coefficient

Karooooo  Paycor HCM

Very good diversification

The 3 months correlation between Karooooo and Paycor is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Karooooo and Paycor HCM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paycor HCM and Karooooo 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 Karooooo are associated (or correlated) with Paycor HCM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paycor HCM has no effect on the direction of Karooooo i.e., Karooooo and Paycor HCM go up and down completely randomly.

Pair Corralation between Karooooo and Paycor HCM

Given the investment horizon of 90 days Karooooo is expected to under-perform the Paycor HCM. But the stock apears to be less risky and, when comparing its historical volatility, Karooooo is 1.14 times less risky than Paycor HCM. The stock trades about -0.04 of its potential returns per unit of risk. The Paycor HCM is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,879  in Paycor HCM on December 29, 2024 and sell it today you would earn a total of  366.00  from holding Paycor HCM or generate 19.48% return on investment over 90 days.

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

Karooooo  vs.  Paycor HCM

Karooooo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Karooooo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Karooooo is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Paycor HCM

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Paycor HCM are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Paycor HCM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Karooooo and Paycor HCM

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

The idea behind Karooooo and Paycor HCM 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.