Correlation Between Paycor HCM and American Software

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

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

Diversification Opportunities for Paycor HCM and American Software

0.32

Correlation Coefficient

Paycor HCM  American Software

Weak diversification

The 3 months correlation between Paycor and American is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Paycor HCM and American Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Software and Paycor HCM 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 Paycor HCM are associated (or correlated) with American Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Software has no effect on the direction of Paycor HCM i.e., Paycor HCM and American Software go up and down completely randomly.

Pair Corralation between Paycor HCM and American Software

Given the investment horizon of 90 days Paycor HCM is expected to generate 0.83 times more return on investment than American Software. However, Paycor HCM is 1.21 times less risky than American Software. It trades about -0.21 of its potential returns per unit of risk. American Software is currently generating about -0.2 per unit of risk. If you would invest  1,886  in Paycor HCM on February 1, 2024 and sell it today you would lose (149.00) from holding Paycor HCM or give up 7.9% of portfolio value over 90 days.

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

Paycor HCM  vs.  American Software

Paycor HCM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paycor HCM has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

American Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal 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 Paycor HCM and American Software

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

The idea behind Paycor HCM and American Software 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..