Correlation Between Paycom Soft and ARC Document

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

By analyzing existing cross correlation between Paycom Soft and ARC Document Solutions, you can compare the effects of market volatilities on Paycom Soft and ARC Document 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 ARC Document. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paycom Soft and ARC Document.

Diversification Opportunities for Paycom Soft and ARC Document

0.42

Correlation Coefficient

Paycom Soft  ARC Document

Very weak diversification

The 3 months correlation between Paycom and ARC is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Soft and ARC Document Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARC Document Solutions 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 ARC Document. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARC Document Solutions has no effect on the direction of Paycom Soft i.e., Paycom Soft and ARC Document go up and down completely randomly.

Pair Corralation between Paycom Soft and ARC Document

Given the investment horizon of 90 days Paycom Soft is expected to generate 14.59 times more return on investment than ARC Document. However, Paycom Soft is 14.59 times more volatile than ARC Document Solutions. It trades about 0.2 of its potential returns per unit of risk. ARC Document Solutions is currently generating about 0.21 per unit of risk. If you would invest  16,103  in Paycom Soft on September 3, 2024 and sell it today you would earn a total of  7,089  from holding Paycom Soft or generate 44.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	92.19%
Values	Daily Returns

Paycom Soft  vs.  ARC Document Solutions

Paycom Soft

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Soft are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Paycom Soft exhibited solid returns over the last few months and may actually be approaching a breakup point.

ARC Document Solutions

Risk-Adjusted Performance

0 of 100

Solid

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

Pair Trading with Paycom Soft and ARC Document

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

The idea behind Paycom Soft and ARC Document Solutions 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.