Correlation Between Worldline and Endava

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

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

Diversification Opportunities for Worldline and Endava

0.42

Correlation Coefficient

Worldline  Endava

Very weak diversification

The 3 months correlation between Worldline and Endava is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Worldline SA and Endava in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endava and Worldline 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 Worldline SA are associated (or correlated) with Endava. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endava has no effect on the direction of Worldline i.e., Worldline and Endava go up and down completely randomly.

Pair Corralation between Worldline and Endava

Assuming the 90 days horizon Worldline SA is expected to generate 2.18 times more return on investment than Endava. However, Worldline is 2.18 times more volatile than Endava. It trades about 0.4 of its potential returns per unit of risk. Endava is currently generating about 0.17 per unit of risk. If you would invest  644.00  in Worldline SA on September 26, 2024 and sell it today you would earn a total of  256.00  from holding Worldline SA or generate 39.75% return on investment over 90 days.

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

Worldline SA  vs.  Endava

Worldline SA

Risk-Adjusted Performance

11 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Worldline SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Worldline reported solid returns over the last few months and may actually be approaching a breakup point.

Endava

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Endava are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Endava sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Worldline and Endava

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

The idea behind Worldline SA and Endava 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.