Correlation Between Workiva and Adyen NV
Can any of the company-specific risk be diversified away by investing in both Workiva and Adyen NV 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 Adyen NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Workiva and Adyen NV, you can compare the effects of market volatilities on Workiva and Adyen NV 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 Adyen NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Workiva and Adyen NV.
Diversification Opportunities for Workiva and Adyen NV
Pay attention - limited upside
The 3 months correlation between Workiva and Adyen is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Workiva and Adyen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adyen NV 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 Adyen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adyen NV has no effect on the direction of Workiva i.e., Workiva and Adyen NV go up and down completely randomly.
Pair Corralation between Workiva and Adyen NV
Allowing for the 90-day total investment horizon Workiva is expected to under-perform the Adyen NV. But the stock apears to be less risky and, when comparing its historical volatility, Workiva is 1.04 times less risky than Adyen NV. The stock trades about -0.21 of its potential returns per unit of risk. The Adyen NV is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 159,999 in Adyen NV on January 20, 2024 and sell it today you would lose (7,952) from holding Adyen NV or give up 4.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Workiva vs. Adyen NV
Performance |
| Timeline |
| Workiva |
| Adyen NV |
Workiva and Adyen NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Workiva and Adyen NV
The main advantage of trading using opposite Workiva and Adyen NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workiva position performs unexpectedly, Adyen NV 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 Adyen NV will offset losses from the drop in Adyen NV's long position.The idea behind Workiva and Adyen NV 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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