Correlation Between Paycom Soft and Elemental Royalties

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

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

Diversification Opportunities for Paycom Soft and Elemental Royalties

0.52

Correlation Coefficient

Paycom Soft  Elemental Royalties

Very weak diversification

The 3 months correlation between Paycom and Elemental is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Soft and Elemental Royalties Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elemental Royalties Corp 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 Elemental Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elemental Royalties Corp has no effect on the direction of Paycom Soft i.e., Paycom Soft and Elemental Royalties go up and down completely randomly.

Pair Corralation between Paycom Soft and Elemental Royalties

Given the investment horizon of 90 days Paycom Soft is expected to generate 2.2 times less return on investment than Elemental Royalties. But when comparing it to its historical volatility, Paycom Soft is 1.12 times less risky than Elemental Royalties. It trades about 0.07 of its potential returns per unit of risk. Elemental Royalties Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  79.00  in Elemental Royalties Corp on December 30, 2024 and sell it today you would earn a total of  14.00  from holding Elemental Royalties Corp or generate 17.72% return on investment over 90 days.

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

Paycom Soft  vs.  Elemental Royalties Corp

Paycom Soft

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Soft are ranked lower than 5 (%) 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.

Elemental Royalties Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elemental Royalties Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Elemental Royalties reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paycom Soft and Elemental Royalties

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

The idea behind Paycom Soft and Elemental Royalties Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.