Correlation Between NetApp and Workday

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

Diversification Opportunities for NetApp and Workday

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between NetApp and Workday is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding NetApp Inc and Workday in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workday and NetApp 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 NetApp Inc are associated (or correlated) with Workday. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workday has no effect on the direction of NetApp i.e., NetApp and Workday go up and down completely randomly.

Pair Corralation between NetApp and Workday

Given the investment horizon of 90 days NetApp Inc is expected to under-perform the Workday. But the stock apears to be less risky and, when comparing its historical volatility, NetApp Inc is 1.59 times less risky than Workday. The stock trades about -0.29 of its potential returns per unit of risk. The Workday is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  15,925  in Workday on April 8, 2022 and sell it today you would lose (1,331)  from holding Workday or give up 8.36% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

NetApp Inc  vs.  Workday

 Performance (%) 
      Timeline 
NetApp Inc 
NetApp Performance
0 of 100
Over the last 90 days NetApp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in August 2022. The recent disarray may also be a sign of long period up-swing for the firm insiders.

NetApp Price Channel

Workday 
Workday Performance
0 of 100
Over the last 90 days Workday has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in August 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Workday Price Channel

NetApp and Workday Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with NetApp and Workday

The main advantage of trading using opposite NetApp and Workday positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetApp position performs unexpectedly, Workday 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 Workday will offset losses from the drop in Workday's long position.
The idea behind NetApp Inc and Workday 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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