Correlation Between Adcorp and Workforce Holdings

Can any of the company-specific risk be diversified away by investing in both Adcorp and Workforce Holdings 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 Adcorp and Workforce Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Adcorp and Workforce Holdings, you can compare the effects of market volatilities on Adcorp and Workforce Holdings 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 Adcorp with a short position of Workforce Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adcorp and Workforce Holdings.

Diversification Opportunities for Adcorp and Workforce Holdings

0.4

Correlation Coefficient

Adcorp  Workforce Holdings

Very weak diversification

The 3 months correlation between Adcorp and Workforce is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Adcorp and Workforce Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workforce Holdings and Adcorp 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 Adcorp are associated (or correlated) with Workforce Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workforce Holdings has no effect on the direction of Adcorp i.e., Adcorp and Workforce Holdings go up and down completely randomly.

Pair Corralation between Adcorp and Workforce Holdings

Assuming the 90 days trading horizon Adcorp is expected to generate 15.32 times more return on investment than Workforce Holdings. However, Adcorp is 15.32 times more volatile than Workforce Holdings. It trades about 0.03 of its potential returns per unit of risk. Workforce Holdings is currently generating about 0.23 per unit of risk. If you would invest  47,500  in Adcorp on September 24, 2024 and sell it today you would earn a total of  500.00  from holding Adcorp or generate 1.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Adcorp  vs.  Workforce Holdings

Adcorp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Adcorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Adcorp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Workforce Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Workforce Holdings 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Adcorp and Workforce Holdings

The main advantage of trading using opposite Adcorp and Workforce Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adcorp position performs unexpectedly, Workforce Holdings 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 Workforce Holdings will offset losses from the drop in Workforce Holdings' long position.

The idea behind Adcorp and Workforce Holdings 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.