Correlation Between TFS FINANCIAL and Workiva

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

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

Diversification Opportunities for TFS FINANCIAL and Workiva

0.81

Correlation Coefficient

TFS FINANCIAL  Workiva

Very poor diversification

The 3 months correlation between TFS and Workiva is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and Workiva in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workiva and TFS FINANCIAL 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 TFS FINANCIAL are associated (or correlated) with Workiva. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workiva has no effect on the direction of TFS FINANCIAL i.e., TFS FINANCIAL and Workiva go up and down completely randomly.

Pair Corralation between TFS FINANCIAL and Workiva

Assuming the 90 days trading horizon TFS FINANCIAL is expected to generate 5.1 times less return on investment than Workiva. But when comparing it to its historical volatility, TFS FINANCIAL is 1.11 times less risky than Workiva. It trades about 0.07 of its potential returns per unit of risk. Workiva is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  7,050  in Workiva on September 23, 2024 and sell it today you would earn a total of  3,550  from holding Workiva or generate 50.35% return on investment over 90 days.

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

TFS FINANCIAL  vs.  Workiva

TFS FINANCIAL

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TFS FINANCIAL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TFS FINANCIAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Workiva

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Workiva are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Workiva reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TFS FINANCIAL and Workiva

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

The idea behind TFS FINANCIAL and Workiva 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.