Correlation Between Veralto and Paychex

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

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

Diversification Opportunities for Veralto and Paychex

-0.44

Correlation Coefficient

Veralto  Paychex

Very good diversification

The 3 months correlation between Veralto and Paychex is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Veralto and Paychex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paychex and Veralto 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 Veralto are associated (or correlated) with Paychex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paychex has no effect on the direction of Veralto i.e., Veralto and Paychex go up and down completely randomly.

Pair Corralation between Veralto and Paychex

Given the investment horizon of 90 days Veralto is expected to under-perform the Paychex. But the stock apears to be less risky and, when comparing its historical volatility, Veralto is 1.1 times less risky than Paychex. The stock trades about -0.05 of its potential returns per unit of risk. The Paychex is currently generating about 0.1 of returns per unit of risk over similar time horizon. 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Veralto  vs.  Paychex

Veralto

Risk-Adjusted Performance

Very Weak

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

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.

Pair Trading with Veralto and Paychex

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

The idea behind Veralto and Paychex 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.