Correlation Between Palantir Technologies and Paycom Software

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

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

Diversification Opportunities for Palantir Technologies and Paycom Software

0.72

Correlation Coefficient

Palantir Technologies  Paycom Software

Poor diversification

The 3 months correlation between Palantir and Paycom is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies and Paycom Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paycom Software and Palantir Technologies 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 Palantir Technologies 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 Palantir Technologies i.e., Palantir Technologies and Paycom Software go up and down completely randomly.

Pair Corralation between Palantir Technologies and Paycom Software

Assuming the 90 days trading horizon Palantir Technologies is expected to generate 1.35 times more return on investment than Paycom Software. However, Palantir Technologies is 1.35 times more volatile than Paycom Software. It trades about 0.39 of its potential returns per unit of risk. Paycom Software is currently generating about 0.01 per unit of risk. If you would invest  9,828  in Palantir Technologies on October 6, 2024 and sell it today you would earn a total of  6,688  from holding Palantir Technologies or generate 68.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.37%
Values	Daily Returns

Palantir Technologies  vs.  Paycom Software

Palantir Technologies

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Palantir Technologies 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 Palantir Technologies and Paycom Software

The main advantage of trading using opposite Palantir Technologies and Paycom Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palantir Technologies 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 Palantir Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.