Correlation Between Trencor and Workforce Holdings

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

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

Diversification Opportunities for Trencor and Workforce Holdings

-0.28

Correlation Coefficient

Trencor  Workforce Holdings

Very good diversification

The 3 months correlation between Trencor and Workforce is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Trencor and Workforce Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workforce Holdings and Trencor 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 Trencor 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 Trencor i.e., Trencor and Workforce Holdings go up and down completely randomly.

Pair Corralation between Trencor and Workforce Holdings

Assuming the 90 days trading horizon Trencor is expected to generate 0.71 times more return on investment than Workforce Holdings. However, Trencor is 1.42 times less risky than Workforce Holdings. It trades about 0.13 of its potential returns per unit of risk. Workforce Holdings is currently generating about -0.09 per unit of risk. If you would invest  70,100  in Trencor on October 12, 2024 and sell it today you would earn a total of  9,400  from holding Trencor or generate 13.41% return on investment over 90 days.

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

Trencor  vs.  Workforce Holdings

Trencor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trencor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Trencor 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 Trencor and Workforce Holdings

The main advantage of trading using opposite Trencor and Workforce Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trencor 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 Trencor 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.