Correlation Between Paycom Soft and Open Text

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

By analyzing existing cross correlation between Paycom Soft and Open Text Corp, you can compare the effects of market volatilities on Paycom Soft and Open Text 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 Open Text. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paycom Soft and Open Text.

Diversification Opportunities for Paycom Soft and Open Text

0.15

Correlation Coefficient

Paycom Soft  Open Text

Average diversification

The 3 months correlation between Paycom and Open is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Soft and Open Text Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Open Text Corp 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 Open Text. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Open Text Corp has no effect on the direction of Paycom Soft i.e., Paycom Soft and Open Text go up and down completely randomly.

Pair Corralation between Paycom Soft and Open Text

Given the investment horizon of 90 days Paycom Soft is expected to generate 0.87 times more return on investment than Open Text. However, Paycom Soft is 1.15 times less risky than Open Text. It trades about -0.22 of its potential returns per unit of risk. Open Text Corp is currently generating about -0.27 per unit of risk. If you would invest  20,186  in Paycom Soft on February 7, 2024 and sell it today you would lose (2,742) from holding Paycom Soft or give up 13.58% of portfolio value over 90 days.

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

Paycom Soft  vs.  Open Text Corp

Paycom Soft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paycom Soft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Open Text Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Open Text Corp 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Paycom Soft and Open Text

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

The idea behind Paycom Soft and Open Text Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.