Correlation Between Paycom Soft and ATA Creativity

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

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

Diversification Opportunities for Paycom Soft and ATA Creativity

0.34

Correlation Coefficient

Paycom Soft  ATA Creativity

Weak diversification

The 3 months correlation between Paycom and ATA is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Soft and ATA Creativity Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATA Creativity Global and Paycom Soft 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 Soft are associated (or correlated) with ATA Creativity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATA Creativity Global has no effect on the direction of Paycom Soft i.e., Paycom Soft and ATA Creativity go up and down completely randomly.

Pair Corralation between Paycom Soft and ATA Creativity

Given the investment horizon of 90 days Paycom Soft is expected to generate 1.33 times less return on investment than ATA Creativity. But when comparing it to its historical volatility, Paycom Soft is 3.55 times less risky than ATA Creativity. It trades about 0.19 of its potential returns per unit of risk. ATA Creativity Global is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  79.00  in ATA Creativity Global on December 2, 2024 and sell it today you would earn a total of  4.00  from holding ATA Creativity Global or generate 5.06% return on investment over 90 days.

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

Paycom Soft  vs.  ATA Creativity Global

Paycom Soft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paycom Soft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Paycom Soft is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

ATA Creativity Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days ATA Creativity Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Paycom Soft and ATA Creativity

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

The idea behind Paycom Soft and ATA Creativity Global 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.