Correlation Between Nemetschek and Workiva

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

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

Diversification Opportunities for Nemetschek and Workiva

0.58

Correlation Coefficient

Nemetschek  Workiva

Very weak diversification

The 3 months correlation between Nemetschek and Workiva is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Nemetschek AG ON and Workiva in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workiva and Nemetschek 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 Nemetschek AG ON 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 Nemetschek i.e., Nemetschek and Workiva go up and down completely randomly.

Pair Corralation between Nemetschek and Workiva

Assuming the 90 days trading horizon Nemetschek is expected to generate 4.3 times less return on investment than Workiva. But when comparing it to its historical volatility, Nemetschek AG ON is 1.46 times less risky than Workiva. It trades about 0.11 of its potential returns per unit of risk. Workiva is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  6,400  in Workiva on September 12, 2024 and sell it today you would earn a total of  3,400  from holding Workiva or generate 53.13% return on investment over 90 days.

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

Nemetschek AG ON  vs.  Workiva

Nemetschek AG ON

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nemetschek AG ON are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Nemetschek may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Workiva

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Workiva are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, Workiva reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nemetschek and Workiva

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

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 the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.