Correlation Between Workday and Applovin Corp

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

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

Diversification Opportunities for Workday and Applovin Corp

0.84

Correlation Coefficient

Workday  Applovin Corp

Very poor diversification

The 3 months correlation between Workday and Applovin is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Workday and Applovin Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applovin Corp and Workday 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 Workday are associated (or correlated) with Applovin Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applovin Corp has no effect on the direction of Workday i.e., Workday and Applovin Corp go up and down completely randomly.

Pair Corralation between Workday and Applovin Corp

Given the investment horizon of 90 days Workday is expected to generate 8.91 times less return on investment than Applovin Corp. But when comparing it to its historical volatility, Workday is 3.46 times less risky than Applovin Corp. It trades about 0.1 of its potential returns per unit of risk. Applovin Corp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  12,609  in Applovin Corp on September 20, 2024 and sell it today you would earn a total of  21,180  from holding Applovin Corp or generate 167.98% return on investment over 90 days.

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

Workday  vs.  Applovin Corp

Workday

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Workday are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Workday may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Applovin Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applovin Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Applovin Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Workday and Applovin Corp

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

The idea behind Workday and Applovin Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.