Correlation Between Paycom Soft and Legg Mason

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

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

Diversification Opportunities for Paycom Soft and Legg Mason

-0.79

Correlation Coefficient

Paycom Soft  Legg Mason

Pay attention - limited upside

The 3 months correlation between Paycom and Legg is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Soft and Legg Mason Bw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Bw 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 Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Bw has no effect on the direction of Paycom Soft i.e., Paycom Soft and Legg Mason go up and down completely randomly.

Pair Corralation between Paycom Soft and Legg Mason

Given the investment horizon of 90 days Paycom Soft is expected to generate 12.64 times more return on investment than Legg Mason. However, Paycom Soft is 12.64 times more volatile than Legg Mason Bw. It trades about 0.2 of its potential returns per unit of risk. Legg Mason Bw is currently generating about -0.24 per unit of risk. If you would invest  16,910  in Paycom Soft on September 13, 2024 and sell it today you would earn a total of  7,115  from holding Paycom Soft or generate 42.08% return on investment over 90 days.

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

Paycom Soft  vs.  Legg Mason Bw

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.

Legg Mason Bw

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legg Mason Bw has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Legg Mason 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 Legg Mason

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

The idea behind Paycom Soft and Legg Mason Bw 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.