Correlation Between Paylocity Holdng and PDF Solutions

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

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

Diversification Opportunities for Paylocity Holdng and PDF Solutions

0.34

Correlation Coefficient

Paylocity Holdng  PDF Solutions

Weak diversification

The 3 months correlation between Paylocity and PDF is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Paylocity Holdng and PDF Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDF Solutions 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 PDF Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PDF Solutions has no effect on the direction of Paylocity Holdng i.e., Paylocity Holdng and PDF Solutions go up and down completely randomly.

Pair Corralation between Paylocity Holdng and PDF Solutions

Given the investment horizon of 90 days Paylocity Holdng is expected to generate 0.48 times more return on investment than PDF Solutions. However, Paylocity Holdng is 2.09 times less risky than PDF Solutions. It trades about -0.03 of its potential returns per unit of risk. PDF Solutions is currently generating about -0.12 per unit of risk. If you would invest  20,005  in Paylocity Holdng on December 28, 2024 and sell it today you would lose (892.00) from holding Paylocity Holdng or give up 4.46% of portfolio value over 90 days.

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

Paylocity Holdng  vs.  PDF Solutions

Paylocity Holdng

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paylocity Holdng has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Paylocity Holdng is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

PDF Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days PDF Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Paylocity Holdng and PDF Solutions

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

The idea behind Paylocity Holdng and PDF Solutions 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.