Correlation Between Paycom Software and United Natural

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

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

Diversification Opportunities for Paycom Software and United Natural

0.66

Correlation Coefficient

Paycom Software  United Natural

Poor diversification

The 3 months correlation between Paycom and United is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Software and United Natural Foods, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Natural Foods, 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 United Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Natural Foods, has no effect on the direction of Paycom Software i.e., Paycom Software and United Natural go up and down completely randomly.

Pair Corralation between Paycom Software and United Natural

Assuming the 90 days trading horizon Paycom Software is expected to under-perform the United Natural. But the stock apears to be less risky and, when comparing its historical volatility, Paycom Software is 2.68 times less risky than United Natural. The stock trades about -0.24 of its potential returns per unit of risk. The United Natural Foods, is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,663  in United Natural Foods, on October 6, 2024 and sell it today you would earn a total of  516.00  from holding United Natural Foods, or generate 14.09% return on investment over 90 days.

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

Paycom Software  vs.  United Natural Foods,

Paycom Software

Risk-Adjusted Performance

11 of 100

Good

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.

United Natural Foods,

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods, are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United Natural sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paycom Software and United Natural

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

The idea behind Paycom Software and United Natural Foods, 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.