Correlation Between Workday and ASE Industrial

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

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

Diversification Opportunities for Workday and ASE Industrial

-0.54

Correlation Coefficient

Workday  ASE Industrial

Excellent diversification

The 3 months correlation between Workday and ASE is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Workday and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding and Workday 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 Workday are associated (or correlated) with ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of Workday i.e., Workday and ASE Industrial go up and down completely randomly.

Pair Corralation between Workday and ASE Industrial

Given the investment horizon of 90 days Workday is expected to under-perform the ASE Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Workday is 1.58 times less risky than ASE Industrial. The stock trades about -0.27 of its potential returns per unit of risk. The ASE Industrial Holding is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,094  in ASE Industrial Holding on February 8, 2024 and sell it today you would lose (55.00) from holding ASE Industrial Holding or give up 5.03% of portfolio value over 90 days.

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

Workday  vs.  ASE Industrial Holding

Workday

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Workday has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

ASE Industrial Holding

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ASE Industrial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Workday and ASE Industrial

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

The idea behind Workday and ASE Industrial Holding 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.