Correlation Between Paycom Software and Telefonaktiebolaget

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

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

Diversification Opportunities for Paycom Software and Telefonaktiebolaget

0.65

Correlation Coefficient

Paycom Software  Telefonaktiebolaget

Poor diversification

The 3 months correlation between Paycom and Telefonaktiebolaget is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Software and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget 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 Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of Paycom Software i.e., Paycom Software and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Paycom Software and Telefonaktiebolaget

Assuming the 90 days trading horizon Paycom Software is expected to generate 20.92 times less return on investment than Telefonaktiebolaget. In addition to that, Paycom Software is 1.39 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about 0.0 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.06 per unit of volatility. If you would invest  1,512  in Telefonaktiebolaget LM Ericsson on September 15, 2024 and sell it today you would earn a total of  1,014  from holding Telefonaktiebolaget LM Ericsson or generate 67.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	80.18%
Values	Daily Returns

Paycom Software  vs.  Telefonaktiebolaget LM Ericsso

Paycom Software

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Software are ranked lower than 12 (%) 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.

Telefonaktiebolaget

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Telefonaktiebolaget sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paycom Software and Telefonaktiebolaget

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

The idea behind Paycom Software and Telefonaktiebolaget LM Ericsson 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.