Correlation Between Paylocity Holdng and Salesforce

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

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

Diversification Opportunities for Paylocity Holdng and Salesforce

0.87

Correlation Coefficient

Paylocity Holdng  Salesforce

Very poor diversification

The 3 months correlation between Paylocity and Salesforce is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Paylocity Holdng and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and Paylocity Holdng 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 Paylocity Holdng are associated (or correlated) with Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of Paylocity Holdng i.e., Paylocity Holdng and Salesforce go up and down completely randomly.

Pair Corralation between Paylocity Holdng and Salesforce

Given the investment horizon of 90 days Paylocity Holdng is expected to generate 1.04 times more return on investment than Salesforce. However, Paylocity Holdng is 1.04 times more volatile than Salesforce. It trades about 0.18 of its potential returns per unit of risk. Salesforce is currently generating about 0.13 per unit of risk. If you would invest  13,200  in Paylocity Holdng on September 27, 2024 and sell it today you would earn a total of  6,919  from holding Paylocity Holdng or generate 52.42% return on investment over 90 days.

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

Paylocity Holdng  vs.  Salesforce

Paylocity Holdng

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paylocity Holdng are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Paylocity Holdng showed solid returns over the last few months and may actually be approaching a breakup point.

Salesforce

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paylocity Holdng and Salesforce

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

The idea behind Paylocity Holdng and Salesforce 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.