Correlation Between Paycom Soft and Innovator Growth

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

By analyzing existing cross correlation between Paycom Soft and Innovator Growth 100 Power, you can compare the effects of market volatilities on Paycom Soft and Innovator Growth 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 Innovator Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paycom Soft and Innovator Growth.

Diversification Opportunities for Paycom Soft and Innovator Growth

-0.15

Correlation Coefficient

Paycom Soft  Innovator Growth

Good diversification

The 3 months correlation between Paycom and Innovator is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Soft and Innovator Growth 100 Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Growth 100 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 Innovator Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Growth 100 has no effect on the direction of Paycom Soft i.e., Paycom Soft and Innovator Growth go up and down completely randomly.

Pair Corralation between Paycom Soft and Innovator Growth

Given the investment horizon of 90 days Paycom Soft is expected to generate 3.22 times more return on investment than Innovator Growth. However, Paycom Soft is 3.22 times more volatile than Innovator Growth 100 Power. It trades about 0.19 of its potential returns per unit of risk. Innovator Growth 100 Power is currently generating about -0.11 per unit of risk. If you would invest  20,756  in Paycom Soft on December 2, 2024 and sell it today you would earn a total of  1,191  from holding Paycom Soft or generate 5.74% 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.  Innovator Growth 100 Power

Paycom Soft

Risk-Adjusted Performance

Very Weak

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

Innovator Growth 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator Growth 100 Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Innovator Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Paycom Soft and Innovator Growth

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

The idea behind Paycom Soft and Innovator Growth 100 Power 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.