Correlation Between Paychex and Hudson Global

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

By analyzing existing cross correlation between Paychex and Hudson Global, you can compare the effects of market volatilities on Paychex and Hudson Global 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 Paychex with a short position of Hudson Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paychex and Hudson Global.

Diversification Opportunities for Paychex and Hudson Global

-0.63

Correlation Coefficient

Paychex  Hudson Global

Excellent diversification

The 3 months correlation between Paychex and Hudson is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Paychex and Hudson Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson Global and Paychex 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 Paychex are associated (or correlated) with Hudson Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudson Global has no effect on the direction of Paychex i.e., Paychex and Hudson Global go up and down completely randomly.

Pair Corralation between Paychex and Hudson Global

Given the investment horizon of 90 days Paychex is expected to generate 0.62 times more return on investment than Hudson Global. However, Paychex is 1.61 times less risky than Hudson Global. It trades about 0.1 of its potential returns per unit of risk. Hudson Global is currently generating about -0.12 per unit of risk. If you would invest  13,905  in Paychex on December 29, 2024 and sell it today you would earn a total of  1,198  from holding Paychex or generate 8.62% return on investment over 90 days.

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

Paychex  vs.  Hudson Global

Paychex

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Paychex are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Paychex may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hudson Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hudson Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Paychex and Hudson Global

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

The idea behind Paychex and Hudson Global 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.