Correlation Between Workiva and Vertex

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

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

Diversification Opportunities for Workiva and Vertex

0.77

Correlation Coefficient

Workiva  Vertex

Poor diversification

The 3 months correlation between Workiva and Vertex is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Workiva and Vertex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertex and Workiva 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 Workiva are associated (or correlated) with Vertex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertex has no effect on the direction of Workiva i.e., Workiva and Vertex go up and down completely randomly.

Pair Corralation between Workiva and Vertex

Allowing for the 90-day total investment horizon Workiva is expected to generate 0.8 times more return on investment than Vertex. However, Workiva is 1.25 times less risky than Vertex. It trades about -0.16 of its potential returns per unit of risk. Vertex is currently generating about -0.16 per unit of risk. If you would invest  10,983  in Workiva on December 28, 2024 and sell it today you would lose (2,875) from holding Workiva or give up 26.18% of portfolio value over 90 days.

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

Workiva  vs.  Vertex

Workiva

Risk-Adjusted Performance

Very Weak

Over the last 90 days Workiva has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Vertex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vertex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Workiva and Vertex

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

The idea behind Workiva and Vertex 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.