Correlation Between Lennar and Paycom Software

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

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

Diversification Opportunities for Lennar and Paycom Software

-0.48

Correlation Coefficient

Lennar  Paycom Software

Very good diversification

The 3 months correlation between Lennar and Paycom is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lennar and Paycom Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paycom Software and Lennar 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 Lennar 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 Lennar i.e., Lennar and Paycom Software go up and down completely randomly.

Pair Corralation between Lennar and Paycom Software

Assuming the 90 days trading horizon Lennar is expected to under-perform the Paycom Software. In addition to that, Lennar is 1.02 times more volatile than Paycom Software. It trades about -0.43 of its total potential returns per unit of risk. Paycom Software is currently generating about -0.24 per unit of volatility. If you would invest  4,590  in Paycom Software on October 8, 2024 and sell it today you would lose (442.00) from holding Paycom Software or give up 9.63% of portfolio value over 90 days.

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

Lennar  vs.  Paycom Software

Lennar

Risk-Adjusted Performance

0 of 100

Very Weak

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

Paycom Software

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Software are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Paycom Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lennar and Paycom Software

The main advantage of trading using opposite Lennar and Paycom Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennar 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 Lennar 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.