Correlation Between BASE and Workiva

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

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

Diversification Opportunities for BASE and Workiva

0.7

Correlation Coefficient

BASE  Workiva

Poor diversification

The 3 months correlation between BASE and Workiva is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding BASE Inc and Workiva in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workiva and BASE 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 BASE 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 BASE i.e., BASE and Workiva go up and down completely randomly.

Pair Corralation between BASE and Workiva

Assuming the 90 days horizon BASE is expected to generate 1.44 times less return on investment than Workiva. In addition to that, BASE is 2.15 times more volatile than Workiva. It trades about 0.05 of its total potential returns per unit of risk. Workiva is currently generating about 0.15 per unit of volatility. If you would invest  7,250  in Workiva on October 13, 2024 and sell it today you would earn a total of  3,336  from holding Workiva or generate 46.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.31%
Values	Daily Returns

BASE Inc  vs.  Workiva

BASE Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BASE Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, BASE reported solid returns over the last few months and may actually be approaching a breakup point.

Workiva

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Workiva are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain forward-looking signals, Workiva disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BASE and Workiva

The main advantage of trading using opposite BASE and Workiva positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASE 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 BASE 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.