Correlation Between Model N and Paycom Soft

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

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

Diversification Opportunities for Model N and Paycom Soft

0.47

Correlation Coefficient

Model N  Paycom Soft

Very weak diversification

The 3 months correlation between Model and Paycom is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Model N and Paycom Soft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paycom Soft and Model N 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 Model N are associated (or correlated) with Paycom Soft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paycom Soft has no effect on the direction of Model N i.e., Model N and Paycom Soft go up and down completely randomly.

Pair Corralation between Model N and Paycom Soft

If you would invest  3,000  in Model N on September 21, 2024 and sell it today you would earn a total of  0.00  from holding Model N or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.55%
Values	Daily Returns

Model N  vs.  Paycom Soft

Model N

Risk-Adjusted Performance

0 of 100

Very Weak

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

Paycom Soft

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Soft are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Paycom Soft exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Model N and Paycom Soft

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

The idea behind Model N and Paycom Soft 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.