Correlation Between Paycom Soft and Mastech Holdings

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

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

Diversification Opportunities for Paycom Soft and Mastech Holdings

0.86

Correlation Coefficient

Paycom Soft  Mastech Holdings

Very poor diversification

The 3 months correlation between Paycom and Mastech is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Soft and Mastech Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastech Holdings 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 Mastech Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastech Holdings has no effect on the direction of Paycom Soft i.e., Paycom Soft and Mastech Holdings go up and down completely randomly.

Pair Corralation between Paycom Soft and Mastech Holdings

Given the investment horizon of 90 days Paycom Soft is expected to generate 1.38 times less return on investment than Mastech Holdings. But when comparing it to its historical volatility, Paycom Soft is 1.73 times less risky than Mastech Holdings. It trades about 0.18 of its potential returns per unit of risk. Mastech Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  994.00  in Mastech Holdings on September 16, 2024 and sell it today you would earn a total of  496.00  from holding Mastech Holdings or generate 49.9% return on investment over 90 days.

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

Paycom Soft  vs.  Mastech Holdings

Paycom Soft

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Soft are ranked lower than 14 (%) 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.

Mastech Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastech Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Mastech Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paycom Soft and Mastech Holdings

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

The idea behind Paycom Soft and Mastech Holdings 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.