Correlation Between Workiva and Alarm Holdings
Can any of the company-specific risk be diversified away by investing in both Workiva and Alarm Holdings 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 Alarm Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Workiva and Alarm Holdings, you can compare the effects of market volatilities on Workiva and Alarm Holdings 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 Alarm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Workiva and Alarm Holdings.
Diversification Opportunities for Workiva and Alarm Holdings
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Workiva and Alarm is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Workiva and Alarm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alarm Holdings 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 Alarm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alarm Holdings has no effect on the direction of Workiva i.e., Workiva and Alarm Holdings go up and down completely randomly.
Pair Corralation between Workiva and Alarm Holdings
Allowing for the 90-day total investment horizon Workiva is expected to generate 0.72 times more return on investment than Alarm Holdings. However, Workiva is 1.39 times less risky than Alarm Holdings. It trades about 0.5 of its potential returns per unit of risk. Alarm Holdings is currently generating about 0.28 per unit of risk. If you would invest 7,853 in Workiva on August 28, 2024 and sell it today you would earn a total of 1,984 from holding Workiva or generate 25.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Workiva vs. Alarm Holdings
Performance |
| Timeline |
| Workiva |
| Alarm Holdings |
Workiva and Alarm Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Workiva and Alarm Holdings
The main advantage of trading using opposite Workiva and Alarm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workiva position performs unexpectedly, Alarm Holdings 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 Alarm Holdings will offset losses from the drop in Alarm Holdings' long position.The idea behind Workiva and Alarm Holdings 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.| Alarm Holdings vs. Paycor HCM | Alarm Holdings vs. Appfolio | Alarm Holdings vs. Agilysys | Alarm Holdings vs. Alkami Technology |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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