Correlation Between Workday and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Workday and Applied Materials 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 Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Workday and Applied Materials, you can compare the effects of market volatilities on Workday and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Workday and Applied Materials.
Diversification Opportunities for Workday and Applied Materials
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Workday and Applied is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Workday and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Workday i.e., Workday and Applied Materials go up and down completely randomly.
Pair Corralation between Workday and Applied Materials
Given the investment horizon of 90 days Workday is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, Workday is 1.82 times less risky than Applied Materials. The stock trades about -0.3 of its potential returns per unit of risk. The Applied Materials is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 20,925 in Applied Materials on February 10, 2024 and sell it today you would lose (292.00) from holding Applied Materials or give up 1.4% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Workday vs. Applied Materials
Performance |
Timeline |
Workday |
Applied Materials |
Workday and Applied Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Workday and Applied Materials
The main advantage of trading using opposite Workday and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workday position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.Workday vs. Intuit Inc | Workday vs. Zoom Video Communications | Workday vs. ServiceNow | Workday vs. Snowflake |
Applied Materials vs. Axcelis Technologies | Applied Materials vs. Cohu Inc | Applied Materials vs. Amtech Systems | Applied Materials vs. Aehr Test Systems |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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