Correlation Between Exxon and Workday

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

Diversification Opportunities for Exxon and Workday

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Exxon and Workday is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Workday in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workday and Exxon 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 Exxon Mobil Corp 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 Exxon i.e., Exxon and Workday go up and down completely randomly.

Pair Corralation between Exxon and Workday

Considering the 90-day investment horizon Exxon is expected to generate 3.09 times less return on investment than Workday. But when comparing it to its historical volatility, Exxon Mobil Corp is 1.17 times less risky than Workday. It trades about 0.18 of its potential returns per unit of risk. Workday is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest  13,874  in Workday on May 18, 2022 and sell it today you would earn a total of  4,003  from holding Workday or generate 28.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Workday

 Performance (%) 
       Timeline  
Exxon Mobil Corp 
Exxon Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Exxon is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Exxon Price Channel

Workday 
Workday Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Workday are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Workday may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Workday Price Channel

Exxon and Workday Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Workday

The main advantage of trading using opposite Exxon and Workday positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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 Exxon Mobil Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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