Correlation Between Paycom Software and Leidos Holdings

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

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

Diversification Opportunities for Paycom Software and Leidos Holdings

0.73

Correlation Coefficient

Paycom Software  Leidos Holdings

Poor diversification

The 3 months correlation between Paycom and Leidos is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Software and Leidos Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leidos Holdings 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 Leidos Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leidos Holdings has no effect on the direction of Paycom Software i.e., Paycom Software and Leidos Holdings go up and down completely randomly.

Pair Corralation between Paycom Software and Leidos Holdings

Assuming the 90 days trading horizon Paycom Software is expected to generate 21.18 times less return on investment than Leidos Holdings. In addition to that, Paycom Software is 1.85 times more volatile than Leidos Holdings. It trades about 0.0 of its total potential returns per unit of risk. Leidos Holdings is currently generating about 0.08 per unit of volatility. If you would invest  5,478  in Leidos Holdings on September 14, 2024 and sell it today you would earn a total of  4,402  from holding Leidos Holdings or generate 80.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	79.41%
Values	Daily Returns

Paycom Software  vs.  Leidos Holdings

Paycom Software

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Software are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Paycom Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Leidos Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Leidos Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Leidos Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paycom Software and Leidos Holdings

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

The idea behind Paycom Software and Leidos Holdings 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.