Correlation Between Workday and SimCorp AS

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

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

Diversification Opportunities for Workday and SimCorp AS

0.03

Correlation Coefficient

Workday  SimCorp AS

Significant diversification

The 3 months correlation between Workday and SimCorp is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Workday and SimCorp AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SimCorp AS 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 SimCorp AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SimCorp AS has no effect on the direction of Workday i.e., Workday and SimCorp AS go up and down completely randomly.

Pair Corralation between Workday and SimCorp AS

Given the investment horizon of 90 days Workday is expected to generate 4.28 times less return on investment than SimCorp AS. But when comparing it to its historical volatility, Workday is 2.07 times less risky than SimCorp AS. It trades about 0.06 of its potential returns per unit of risk. SimCorp AS is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,226  in SimCorp AS on September 16, 2024 and sell it today you would earn a total of  4,274  from holding SimCorp AS or generate 68.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	26.0%
Values	Daily Returns

Workday  vs.  SimCorp AS

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 uncertain basic indicators, Workday may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SimCorp AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SimCorp AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SimCorp AS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Workday and SimCorp AS

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

The idea behind Workday and SimCorp AS 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.