Correlation Between Paycom Software and BlackRock

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

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

Diversification Opportunities for Paycom Software and BlackRock

0.88

Correlation Coefficient

Paycom Software  BlackRock

Very poor diversification

The 3 months correlation between Paycom and BlackRock is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Software and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock and Paycom Software 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 Paycom Software are associated (or correlated) with BlackRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock has no effect on the direction of Paycom Software i.e., Paycom Software and BlackRock go up and down completely randomly.

Pair Corralation between Paycom Software and BlackRock

Assuming the 90 days trading horizon Paycom Software is expected to generate 5.26 times less return on investment than BlackRock. But when comparing it to its historical volatility, Paycom Software is 1.09 times less risky than BlackRock. It trades about 0.05 of its potential returns per unit of risk. BlackRock is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  8,932  in BlackRock on September 27, 2024 and sell it today you would earn a total of  896.00  from holding BlackRock or generate 10.03% return on investment over 90 days.

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

Paycom Software  vs.  BlackRock

Paycom Software

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Software are ranked lower than 13 (%) 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.

BlackRock

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BlackRock sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paycom Software and BlackRock

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

The idea behind Paycom Software and BlackRock 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.