Correlation Between Workday and WM Technology

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

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

Diversification Opportunities for Workday and WM Technology

0.48

Correlation Coefficient

Workday  WM Technology

Very weak diversification

The 3 months correlation between Workday and MAPSW is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Workday and WM Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WM Technology 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 WM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WM Technology has no effect on the direction of Workday i.e., Workday and WM Technology go up and down completely randomly.

Pair Corralation between Workday and WM Technology

Given the investment horizon of 90 days Workday is expected to generate 3.16 times less return on investment than WM Technology. But when comparing it to its historical volatility, Workday is 7.17 times less risky than WM Technology. It trades about 0.08 of its potential returns per unit of risk. WM Technology is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3.58  in WM Technology on September 14, 2024 and sell it today you would lose (0.92) from holding WM Technology or give up 25.7% of portfolio value over 90 days.

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

Workday  vs.  WM Technology

Workday

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Workday are ranked lower than 6 (%) 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.

WM Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WM Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, WM Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Workday and WM Technology

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

The idea behind Workday and WM Technology 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.