Correlation Between STMicroelectronics and Paycom Software
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Paycom Software 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 STMicroelectronics and Paycom Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Paycom Software, you can compare the effects of market volatilities on STMicroelectronics and Paycom Software 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 STMicroelectronics with a short position of Paycom Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Paycom Software.
Diversification Opportunities for STMicroelectronics and Paycom Software
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STMicroelectronics and Paycom is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Paycom Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paycom Software and STMicroelectronics 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 STMicroelectronics NV are associated (or correlated) with Paycom Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paycom Software has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Paycom Software go up and down completely randomly.
Pair Corralation between STMicroelectronics and Paycom Software
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Paycom Software. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 4.56 times less risky than Paycom Software. The stock trades about -0.44 of its potential returns per unit of risk. The Paycom Software is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 3,165 in Paycom Software on August 27, 2024 and sell it today you would earn a total of 1,099 from holding Paycom Software or generate 34.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
STMicroelectronics NV vs. Paycom Software
Performance |
| Timeline |
| STMicroelectronics |
| Paycom Software |
STMicroelectronics and Paycom Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Paycom Software
The main advantage of trading using opposite STMicroelectronics and Paycom Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Paycom Software 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 Paycom Software will offset losses from the drop in Paycom Software's long position.| STMicroelectronics vs. GP Investments | STMicroelectronics vs. Fidelity National Information | STMicroelectronics vs. Verizon Communications | STMicroelectronics vs. Marfrig Global Foods |
| Paycom Software vs. Charter Communications | Paycom Software vs. Taiwan Semiconductor Manufacturing | Paycom Software vs. Telecomunicaes Brasileiras SA | Paycom Software vs. STMicroelectronics NV |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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