Correlation Between Crocs and Workiva
Can any of the company-specific risk be diversified away by investing in both Crocs and Workiva 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 Crocs and Workiva into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crocs Inc and Workiva, you can compare the effects of market volatilities on Crocs and Workiva 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 Crocs with a short position of Workiva. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crocs and Workiva.
Diversification Opportunities for Crocs and Workiva
Pay attention - limited upside
The 3 months correlation between Crocs and Workiva is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Crocs Inc and Workiva in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workiva and Crocs 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 Crocs Inc are associated (or correlated) with Workiva. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workiva has no effect on the direction of Crocs i.e., Crocs and Workiva go up and down completely randomly.
Pair Corralation between Crocs and Workiva
Given the investment horizon of 90 days Crocs Inc is expected to under-perform the Workiva. But the stock apears to be less risky and, when comparing its historical volatility, Crocs Inc is 1.05 times less risky than Workiva. The stock trades about -0.26 of its potential returns per unit of risk. The Workiva is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 8,267 in Workiva on January 26, 2024 and sell it today you would lose (238.00) from holding Workiva or give up 2.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Crocs Inc vs. Workiva
Performance |
| Timeline |
| Crocs Inc |
| Workiva |
Crocs and Workiva Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crocs and Workiva
The main advantage of trading using opposite Crocs and Workiva positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crocs position performs unexpectedly, Workiva 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 Workiva will offset losses from the drop in Workiva's long position.The idea behind Crocs Inc and Workiva 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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