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

-0.13

Correlation Coefficient

STMicroelectronics  Paycom Software

Good diversification

The 3 months correlation between STMicroelectronics and Paycom is -0.13. 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 generate 1.03 times more return on investment than Paycom Software. However, STMicroelectronics is 1.03 times more volatile than Paycom Software. It trades about 0.19 of its potential returns per unit of risk. Paycom Software is currently generating about 0.02 per unit of risk. If you would invest  13,090  in STMicroelectronics NV on April 25, 2025 and sell it today you would earn a total of  4,442  from holding STMicroelectronics NV or generate 33.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

STMicroelectronics NV  vs.  Paycom Software

STMicroelectronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, STMicroelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Paycom Software

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Software are ranked lower than 1 (%) 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 newest stock price disturbance, may contribute to short-term losses for the investors.

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.

The idea behind STMicroelectronics NV and Paycom 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.