Correlation Between Workiva and Media
Can any of the company-specific risk be diversified away by investing in both Workiva and Media 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 Workiva and Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Workiva and Media and Games, you can compare the effects of market volatilities on Workiva and Media 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 Workiva with a short position of Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Workiva and Media.
Diversification Opportunities for Workiva and Media
Average diversification
The 3 months correlation between Workiva and Media is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Workiva and Media and Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Media and Games and Workiva 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 Workiva are associated (or correlated) with Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Media and Games has no effect on the direction of Workiva i.e., Workiva and Media go up and down completely randomly.
Pair Corralation between Workiva and Media
Assuming the 90 days trading horizon Workiva is expected to generate 0.61 times more return on investment than Media. However, Workiva is 1.65 times less risky than Media. It trades about 0.28 of its potential returns per unit of risk. Media and Games is currently generating about -0.28 per unit of risk. If you would invest 9,250 in Workiva on September 26, 2024 and sell it today you would earn a total of 1,350 from holding Workiva or generate 14.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Workiva vs. Media and Games
Performance |
| Timeline |
| Workiva |
| Media and Games |
Workiva and Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Workiva and Media
The main advantage of trading using opposite Workiva and Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workiva position performs unexpectedly, Media 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 Media will offset losses from the drop in Media's long position.The idea behind Workiva and Media and Games 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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