Correlation Between Workiva and SimilarWeb
Can any of the company-specific risk be diversified away by investing in both Workiva and SimilarWeb 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 SimilarWeb into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Workiva and SimilarWeb, you can compare the effects of market volatilities on Workiva and SimilarWeb 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 SimilarWeb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Workiva and SimilarWeb.
Diversification Opportunities for Workiva and SimilarWeb
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Workiva and SimilarWeb is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Workiva and SimilarWeb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SimilarWeb 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 SimilarWeb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SimilarWeb has no effect on the direction of Workiva i.e., Workiva and SimilarWeb go up and down completely randomly.
Pair Corralation between Workiva and SimilarWeb
Allowing for the 90-day total investment horizon Workiva is expected to generate 0.58 times more return on investment than SimilarWeb. However, Workiva is 1.74 times less risky than SimilarWeb. It trades about -0.05 of its potential returns per unit of risk. SimilarWeb is currently generating about -0.07 per unit of risk. If you would invest 9,821 in Workiva on December 3, 2024 and sell it today you would lose (1,029) from holding Workiva or give up 10.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Workiva vs. SimilarWeb
Performance |
| Timeline |
| Workiva |
| SimilarWeb |
Workiva and SimilarWeb Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Workiva and SimilarWeb
The main advantage of trading using opposite Workiva and SimilarWeb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workiva position performs unexpectedly, SimilarWeb 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 SimilarWeb will offset losses from the drop in SimilarWeb's long position.The idea behind Workiva and SimilarWeb 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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