Correlation Between Paycom Software and NXP Semiconductors

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

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

Diversification Opportunities for Paycom Software and NXP Semiconductors

0.07

Correlation Coefficient

Paycom Software  NXP Semiconductors

Significant diversification

The 3 months correlation between Paycom and NXP is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Paycom Software and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors 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 NXP Semiconductors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXP Semiconductors has no effect on the direction of Paycom Software i.e., Paycom Software and NXP Semiconductors go up and down completely randomly.

Pair Corralation between Paycom Software and NXP Semiconductors

Assuming the 90 days trading horizon Paycom Software is expected to generate 4.73 times less return on investment than NXP Semiconductors. In addition to that, Paycom Software is 1.08 times more volatile than NXP Semiconductors NV. It trades about 0.03 of its total potential returns per unit of risk. NXP Semiconductors NV is currently generating about 0.17 per unit of volatility. If you would invest  49,393  in NXP Semiconductors NV on April 22, 2025 and sell it today you would earn a total of  13,334  from holding NXP Semiconductors NV or generate 27.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Paycom Software  vs.  NXP Semiconductors NV

Paycom Software

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Software are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Paycom Software is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NXP Semiconductors

Risk-Adjusted Performance

Good

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

Pair Trading with Paycom Software and NXP Semiconductors

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

The idea behind Paycom Software and NXP Semiconductors NV 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.