Correlation Between Paycom Software and Costco Wholesale

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

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

Diversification Opportunities for Paycom Software and Costco Wholesale

0.46

Correlation Coefficient

Paycom Software  Costco Wholesale

Very weak diversification

The 3 months correlation between Paycom and Costco is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Software and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and Paycom Software 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 Software are associated (or correlated) with Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale has no effect on the direction of Paycom Software i.e., Paycom Software and Costco Wholesale go up and down completely randomly.

Pair Corralation between Paycom Software and Costco Wholesale

Assuming the 90 days trading horizon Paycom Software is expected to generate 1.43 times more return on investment than Costco Wholesale. However, Paycom Software is 1.43 times more volatile than Costco Wholesale. It trades about 0.03 of its potential returns per unit of risk. Costco Wholesale is currently generating about -0.09 per unit of risk. If you would invest  4,224  in Paycom Software on May 3, 2025 and sell it today you would earn a total of  136.00  from holding Paycom Software or generate 3.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Paycom Software  vs.  Costco Wholesale

Paycom Software

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Software are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Paycom Software is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Costco Wholesale

Risk-Adjusted Performance

Very Weak

Over the last 90 days Costco Wholesale has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Paycom Software and Costco Wholesale

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

The idea behind Paycom Software and Costco Wholesale 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.