Correlation Between Paycom Software and Bank of America
Can any of the company-specific risk be diversified away by investing in both Paycom Software and Bank of America 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 Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paycom Software and Bank of America, you can compare the effects of market volatilities on Paycom Software and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paycom Software and Bank of America.
Diversification Opportunities for Paycom Software and Bank of America
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Paycom and Bank is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Software and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Paycom Software i.e., Paycom Software and Bank of America go up and down completely randomly.
Pair Corralation between Paycom Software and Bank of America
Assuming the 90 days trading horizon Paycom Software is expected to generate 1.06 times more return on investment than Bank of America. However, Paycom Software is 1.06 times more volatile than Bank of America. It trades about -0.05 of its potential returns per unit of risk. Bank of America is currently generating about -0.36 per unit of risk. If you would invest 4,104 in Paycom Software on November 28, 2024 and sell it today you would lose (60.00) from holding Paycom Software or give up 1.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Paycom Software vs. Bank of America
Performance |
| Timeline |
| Paycom Software |
| Bank of America |
Paycom Software and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paycom Software and Bank of America
The main advantage of trading using opposite Paycom Software and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paycom Software position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Paycom Software vs. Telecomunicaes Brasileiras SA | Paycom Software vs. Charter Communications | Paycom Software vs. NXP Semiconductors NV | Paycom Software vs. Verizon Communications |
| Bank of America vs. Applied Materials, | Bank of America vs. Cognizant Technology Solutions | Bank of America vs. Chunghwa Telecom Co, | Bank of America vs. DENTSPLY SIRONA |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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