Correlation Between Paycom Soft and Sun Hung

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

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

Diversification Opportunities for Paycom Soft and Sun Hung

-0.19

Correlation Coefficient

Paycom Soft  Sun Hung

Good diversification

The 3 months correlation between Paycom and Sun is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Soft and Sun Hung Kai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Hung Kai 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 Sun Hung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Hung Kai has no effect on the direction of Paycom Soft i.e., Paycom Soft and Sun Hung go up and down completely randomly.

Pair Corralation between Paycom Soft and Sun Hung

Given the investment horizon of 90 days Paycom Soft is expected to under-perform the Sun Hung. But the stock apears to be less risky and, when comparing its historical volatility, Paycom Soft is 1.58 times less risky than Sun Hung. The stock trades about -0.01 of its potential returns per unit of risk. The Sun Hung Kai is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,182  in Sun Hung Kai on September 4, 2024 and sell it today you would lose (162.00) from holding Sun Hung Kai or give up 13.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.54%
Values	Daily Returns

Paycom Soft  vs.  Sun Hung Kai

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.

Sun Hung Kai

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Hung Kai are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking indicators, Sun Hung may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Paycom Soft and Sun Hung

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

The idea behind Paycom Soft and Sun Hung Kai 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.