Correlation Between Paycom Software and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both Paycom Software and Lockheed Martin 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 Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paycom Software and Lockheed Martin, you can compare the effects of market volatilities on Paycom Software and Lockheed Martin 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 Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paycom Software and Lockheed Martin.
Diversification Opportunities for Paycom Software and Lockheed Martin
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Paycom and Lockheed is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Software and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin 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 Lockheed Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lockheed Martin has no effect on the direction of Paycom Software i.e., Paycom Software and Lockheed Martin go up and down completely randomly.
Pair Corralation between Paycom Software and Lockheed Martin
Assuming the 90 days trading horizon Paycom Software is expected to under-perform the Lockheed Martin. In addition to that, Paycom Software is 1.64 times more volatile than Lockheed Martin. It trades about -0.26 of its total potential returns per unit of risk. Lockheed Martin is currently generating about 0.02 per unit of volatility. If you would invest 294,272 in Lockheed Martin on October 20, 2024 and sell it today you would earn a total of 1,318 from holding Lockheed Martin or generate 0.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Paycom Software vs. Lockheed Martin
Performance |
| Timeline |
| Paycom Software |
| Lockheed Martin |
Paycom Software and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paycom Software and Lockheed Martin
The main advantage of trading using opposite Paycom Software and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paycom Software position performs unexpectedly, Lockheed Martin 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 Lockheed Martin will offset losses from the drop in Lockheed Martin's long position.| Paycom Software vs. Monster Beverage | Paycom Software vs. Multilaser Industrial SA | Paycom Software vs. Metalrgica Riosulense SA | Paycom Software vs. Hospital Mater Dei |
| Lockheed Martin vs. Taurus Armas SA | Lockheed Martin vs. Schulz SA | Lockheed Martin vs. Petro Rio SA | Lockheed Martin vs. Movida Participaes SA |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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