Correlation Between Paycom Software and Metalurgica Gerdau

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

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

Diversification Opportunities for Paycom Software and Metalurgica Gerdau

0.86

Correlation Coefficient

Paycom Software  Metalurgica Gerdau

Very poor diversification

The 3 months correlation between Paycom and Metalurgica is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Software and Metalurgica Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalurgica Gerdau 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 Metalurgica Gerdau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalurgica Gerdau has no effect on the direction of Paycom Software i.e., Paycom Software and Metalurgica Gerdau go up and down completely randomly.

Pair Corralation between Paycom Software and Metalurgica Gerdau

Assuming the 90 days trading horizon Paycom Software is expected to generate 0.82 times more return on investment than Metalurgica Gerdau. However, Paycom Software is 1.22 times less risky than Metalurgica Gerdau. It trades about -0.08 of its potential returns per unit of risk. Metalurgica Gerdau SA is currently generating about -0.2 per unit of risk. If you would invest  4,590  in Paycom Software on December 5, 2024 and sell it today you would lose (375.00) from holding Paycom Software or give up 8.17% of portfolio value over 90 days.

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

Paycom Software  vs.  Metalurgica Gerdau SA

Paycom Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paycom Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Metalurgica Gerdau

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metalurgica Gerdau SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Paycom Software and Metalurgica Gerdau

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

The idea behind Paycom Software and Metalurgica Gerdau SA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..