Correlation Between Paycom Soft and Heritage Fund

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

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

Diversification Opportunities for Paycom Soft and Heritage Fund

-0.3

Correlation Coefficient

Paycom Soft  Heritage Fund

Very good diversification

The 3 months correlation between Paycom and Heritage is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Soft and Heritage Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Fund A 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 Heritage Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Fund A has no effect on the direction of Paycom Soft i.e., Paycom Soft and Heritage Fund go up and down completely randomly.

Pair Corralation between Paycom Soft and Heritage Fund

Given the investment horizon of 90 days Paycom Soft is expected to generate 1.18 times more return on investment than Heritage Fund. However, Paycom Soft is 1.18 times more volatile than Heritage Fund A. It trades about 0.08 of its potential returns per unit of risk. Heritage Fund A is currently generating about -0.06 per unit of risk. If you would invest  20,636  in Paycom Soft on December 27, 2024 and sell it today you would earn a total of  1,636  from holding Paycom Soft or generate 7.93% return on investment over 90 days.

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

Paycom Soft  vs.  Heritage Fund A

Paycom Soft

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Soft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Paycom Soft may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Heritage Fund A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heritage Fund A has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Heritage Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Paycom Soft and Heritage Fund

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

The idea behind Paycom Soft and Heritage Fund A 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.