Correlation Between Workday and Analog Devices

Can any of the company-specific risk be diversified away by investing in both Workday and Analog Devices 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 Workday and Analog Devices into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Workday and Analog Devices, you can compare the effects of market volatilities on Workday and Analog Devices 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 Workday with a short position of Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Workday and Analog Devices.

Diversification Opportunities for Workday and Analog Devices

-0.57

Correlation Coefficient

Workday  Analog Devices

Excellent diversification

The 3 months correlation between Workday and Analog is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Workday and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and Workday 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 Workday are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Workday i.e., Workday and Analog Devices go up and down completely randomly.

Pair Corralation between Workday and Analog Devices

Given the investment horizon of 90 days Workday is expected to under-perform the Analog Devices. But the stock apears to be less risky and, when comparing its historical volatility, Workday is 1.6 times less risky than Analog Devices. The stock trades about -0.14 of its potential returns per unit of risk. The Analog Devices is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  19,351  in Analog Devices on February 21, 2024 and sell it today you would earn a total of  2,313  from holding Analog Devices or generate 11.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Workday  vs.  Analog Devices

Workday

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Workday has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Analog Devices

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, Analog Devices demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Workday and Analog Devices

The main advantage of trading using opposite Workday and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workday position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' long position.

The idea behind Workday and Analog Devices 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.