Correlation Between PENN Entertainment, and Paycom Software

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

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

Diversification Opportunities for PENN Entertainment, and Paycom Software

0.82

Correlation Coefficient

PENN Entertainment,  Paycom Software

Very poor diversification

The 3 months correlation between PENN and Paycom is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding PENN Entertainment, and Paycom Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paycom Software and PENN Entertainment, 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 PENN Entertainment, are associated (or correlated) with Paycom Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paycom Software has no effect on the direction of PENN Entertainment, i.e., PENN Entertainment, and Paycom Software go up and down completely randomly.

Pair Corralation between PENN Entertainment, and Paycom Software

Assuming the 90 days trading horizon PENN Entertainment, is expected to generate 0.3 times more return on investment than Paycom Software. However, PENN Entertainment, is 3.36 times less risky than Paycom Software. It trades about -0.1 of its potential returns per unit of risk. Paycom Software is currently generating about -0.24 per unit of risk. If you would invest  1,194  in PENN Entertainment, on October 6, 2024 and sell it today you would lose (15.00) from holding PENN Entertainment, or give up 1.26% of portfolio value over 90 days.

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

PENN Entertainment,  vs.  Paycom Software

PENN Entertainment,

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PENN Entertainment, are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, PENN Entertainment, sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with PENN Entertainment, and Paycom Software

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

The idea behind PENN Entertainment, and Paycom Software 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.