Correlation Between Paycom Software and TechnipFMC Plc

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

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

Diversification Opportunities for Paycom Software and TechnipFMC Plc

0.9

Correlation Coefficient

Paycom Software  TechnipFMC Plc

Almost no diversification

The 3 months correlation between Paycom and TechnipFMC is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Software and TechnipFMC plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC plc 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 TechnipFMC Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TechnipFMC plc has no effect on the direction of Paycom Software i.e., Paycom Software and TechnipFMC Plc go up and down completely randomly.

Pair Corralation between Paycom Software and TechnipFMC Plc

Assuming the 90 days trading horizon Paycom Software is expected to generate 35.52 times less return on investment than TechnipFMC Plc. In addition to that, Paycom Software is 1.56 times more volatile than TechnipFMC plc. It trades about 0.0 of its total potential returns per unit of risk. TechnipFMC plc is currently generating about 0.11 per unit of volatility. If you would invest  5,735  in TechnipFMC plc on October 5, 2024 and sell it today you would earn a total of  12,211  from holding TechnipFMC plc or generate 212.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	71.02%
Values	Daily Returns

Paycom Software  vs.  TechnipFMC plc

Paycom Software

Risk-Adjusted Performance

11 of 100

OK

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 weak basic indicators, Paycom Software sustained solid returns over the last few months and may actually be approaching a breakup point.

TechnipFMC plc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC plc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, TechnipFMC Plc sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paycom Software and TechnipFMC Plc

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

The idea behind Paycom Software and TechnipFMC plc 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 Stocks Directory module to find actively traded stocks across global markets.