Correlation Between Paycom Soft and Sally Beauty
Can any of the company-specific risk be diversified away by investing in both Paycom Soft and Sally Beauty 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 Paycom Soft and Sally Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paycom Soft and Sally Beauty Holdings, you can compare the effects of market volatilities on Paycom Soft and Sally Beauty 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 Paycom Soft with a short position of Sally Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paycom Soft and Sally Beauty.
Diversification Opportunities for Paycom Soft and Sally Beauty
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Paycom and Sally is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Soft and Sally Beauty Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sally Beauty Holdings and Paycom Soft 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 Paycom Soft are associated (or correlated) with Sally Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sally Beauty Holdings has no effect on the direction of Paycom Soft i.e., Paycom Soft and Sally Beauty go up and down completely randomly.
Pair Corralation between Paycom Soft and Sally Beauty
Given the investment horizon of 90 days Paycom Soft is expected to under-perform the Sally Beauty. In addition to that, Paycom Soft is 1.03 times more volatile than Sally Beauty Holdings. It trades about -0.01 of its total potential returns per unit of risk. Sally Beauty Holdings is currently generating about 0.0 per unit of volatility. If you would invest 1,487 in Sally Beauty Holdings on January 25, 2024 and sell it today you would lose (377.00) from holding Sally Beauty Holdings or give up 25.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Paycom Soft vs. Sally Beauty Holdings
Performance |
| Timeline |
| Paycom Soft |
| Sally Beauty Holdings |
Paycom Soft and Sally Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paycom Soft and Sally Beauty
The main advantage of trading using opposite Paycom Soft and Sally Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paycom Soft position performs unexpectedly, Sally Beauty 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 Sally Beauty will offset losses from the drop in Sally Beauty's long position.The idea behind Paycom Soft and Sally Beauty 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.Check out your portfolio center.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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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