Correlation Between Model N and Walkme
Can any of the company-specific risk be diversified away by investing in both Model N and Walkme 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 Model N and Walkme into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Model N and Walkme, you can compare the effects of market volatilities on Model N and Walkme 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 Model N with a short position of Walkme. Check out your portfolio center. Please also check ongoing floating volatility patterns of Model N and Walkme.
Diversification Opportunities for Model N and Walkme
Very weak diversification
The 3 months correlation between Model and Walkme is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Model N and Walkme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walkme and Model N 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 Model N are associated (or correlated) with Walkme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walkme has no effect on the direction of Model N i.e., Model N and Walkme go up and down completely randomly.
Pair Corralation between Model N and Walkme
Given the investment horizon of 90 days Model N is expected to under-perform the Walkme. But the stock apears to be less risky and, when comparing its historical volatility, Model N is 1.54 times less risky than Walkme. The stock trades about -0.02 of its potential returns per unit of risk. The Walkme is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 902.00 in Walkme on August 24, 2024 and sell it today you would earn a total of 493.00 from holding Walkme or generate 54.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 87.89% |
| Values | Daily Returns |
Model N vs. Walkme
Performance |
| Timeline |
| Model N |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Walkme |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Strong
Model N and Walkme Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Model N and Walkme
The main advantage of trading using opposite Model N and Walkme positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Model N position performs unexpectedly, Walkme 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 Walkme will offset losses from the drop in Walkme's long position.The idea behind Model N and Walkme 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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