Correlation Between Workiva and CDK Global

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Can any of the company-specific risk be diversified away by investing in both Workiva and CDK Global 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 CDK Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Workiva and CDK Global Holdings, you can compare the effects of market volatilities on Workiva and CDK Global 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 CDK Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Workiva and CDK Global.

Diversification Opportunities for Workiva and CDK Global

-0.62
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Workiva and CDK is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Workiva and CDK Global Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDK Global 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 CDK Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDK Global Holdings has no effect on the direction of Workiva i.e., Workiva and CDK Global go up and down completely randomly.

Pair Corralation between Workiva and CDK Global

Allowing for the 90-day total investment horizon Workiva is expected to generate 12.01 times more return on investment than CDK Global. However, Workiva is 12.01 times more volatile than CDK Global Holdings. It trades about 0.03 of its potential returns per unit of risk. CDK Global Holdings is currently generating about 0.14 per unit of risk. If you would invest  6,994  in Workiva on December 29, 2023 and sell it today you would earn a total of  1,443  from holding Workiva or generate 20.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy10.13%
ValuesDaily Returns

Workiva  vs.  CDK Global Holdings

 Performance 
       Timeline  
Workiva 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Workiva has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
CDK Global Holdings 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days CDK Global Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, CDK Global is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Workiva and CDK Global Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Workiva and CDK Global

The main advantage of trading using opposite Workiva and CDK Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workiva position performs unexpectedly, CDK Global 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 CDK Global will offset losses from the drop in CDK Global's long position.
The idea behind Workiva and CDK Global 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.
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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