Correlation Between Paycor HCM and Automatic Data

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

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

Diversification Opportunities for Paycor HCM and Automatic Data

0.19

Correlation Coefficient

Paycor HCM  Automatic Data

Average diversification

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

Pair Corralation between Paycor HCM and Automatic Data

Given the investment horizon of 90 days Paycor HCM is expected to generate 3.69 times more return on investment than Automatic Data. However, Paycor HCM is 3.69 times more volatile than Automatic Data Processing. It trades about 0.12 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.05 per unit of risk. If you would invest  1,806  in Paycor HCM on November 28, 2024 and sell it today you would earn a total of  414.00  from holding Paycor HCM or generate 22.92% return on investment over 90 days.

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

Paycor HCM  vs.  Automatic Data Processing

Paycor HCM

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Paycor HCM are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Paycor HCM reported solid returns over the last few months and may actually be approaching a breakup point.

Automatic Data Processing

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Automatic Data is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Paycor HCM and Automatic Data

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

The idea behind Paycor HCM and Automatic Data Processing 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.