Correlation Between Workday and Microsoft
Can any of the company-specific risk be diversified away by investing in both Workday and Microsoft 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 Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Workday and Microsoft, you can compare the effects of market volatilities on Workday and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Workday and Microsoft.
Diversification Opportunities for Workday and Microsoft
Very good diversification
The 3 months correlation between Workday and Microsoft is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Workday and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Workday i.e., Workday and Microsoft go up and down completely randomly.
Pair Corralation between Workday and Microsoft
Given the investment horizon of 90 days Workday is expected to generate 1.35 times more return on investment than Microsoft. However, Workday is 1.35 times more volatile than Microsoft. It trades about 0.06 of its potential returns per unit of risk. Microsoft is currently generating about 0.07 per unit of risk. If you would invest 14,637 in Workday on January 25, 2024 and sell it today you would earn a total of 10,937 from holding Workday or generate 74.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Workday vs. Microsoft
Performance |
| Timeline |
| Workday |
| Microsoft |
Workday and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Workday and Microsoft
The main advantage of trading using opposite Workday and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workday position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Workday vs. Intuit Inc | Workday vs. Zoom Video Communications | Workday vs. ServiceNow | Workday vs. Snowflake |
| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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