Correlation Between Aveng and Workforce Holdings

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

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

Diversification Opportunities for Aveng and Workforce Holdings

0.38

Correlation Coefficient

Aveng  Workforce Holdings

Weak diversification

The 3 months correlation between Aveng and Workforce is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Aveng and Workforce Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workforce Holdings and Aveng 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 Aveng 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 Aveng i.e., Aveng and Workforce Holdings go up and down completely randomly.

Pair Corralation between Aveng and Workforce Holdings

Assuming the 90 days trading horizon Aveng is expected to generate 0.82 times more return on investment than Workforce Holdings. However, Aveng is 1.22 times less risky than Workforce Holdings. It trades about 0.23 of its potential returns per unit of risk. Workforce Holdings is currently generating about -0.09 per unit of risk. If you would invest  99,000  in Aveng on October 12, 2024 and sell it today you would earn a total of  28,800  from holding Aveng or generate 29.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aveng  vs.  Workforce Holdings

Aveng

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aveng are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Aveng exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Aveng and Workforce Holdings

The main advantage of trading using opposite Aveng and Workforce Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aveng 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 Aveng 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.