Correlation Between Paylocity Holdng and Clearwater Analytics

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

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

Diversification Opportunities for Paylocity Holdng and Clearwater Analytics

0.36

Correlation Coefficient

Paylocity Holdng  Clearwater Analytics

Weak diversification

The 3 months correlation between Paylocity and Clearwater is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Paylocity Holdng and Clearwater Analytics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearwater Analytics 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 Clearwater Analytics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearwater Analytics has no effect on the direction of Paylocity Holdng i.e., Paylocity Holdng and Clearwater Analytics go up and down completely randomly.

Pair Corralation between Paylocity Holdng and Clearwater Analytics

Given the investment horizon of 90 days Paylocity Holdng is expected to generate 0.86 times more return on investment than Clearwater Analytics. However, Paylocity Holdng is 1.17 times less risky than Clearwater Analytics. It trades about 0.12 of its potential returns per unit of risk. Clearwater Analytics Holdings is currently generating about -0.11 per unit of risk. If you would invest  19,478  in Paylocity Holdng on November 19, 2024 and sell it today you would earn a total of  2,218  from holding Paylocity Holdng or generate 11.39% return on investment over 90 days.

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

Paylocity Holdng  vs.  Clearwater Analytics Holdings

Paylocity Holdng

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Paylocity Holdng are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Paylocity Holdng may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Clearwater Analytics

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Paylocity Holdng and Clearwater Analytics

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

The idea behind Paylocity Holdng and Clearwater Analytics 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.