Correlation Between Guidewire Software and Sims Metal
Can any of the company-specific risk be diversified away by investing in both Guidewire Software and Sims Metal 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 Guidewire Software and Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guidewire Software and Sims Metal Management, you can compare the effects of market volatilities on Guidewire Software and Sims Metal 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 Guidewire Software with a short position of Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidewire Software and Sims Metal.
Diversification Opportunities for Guidewire Software and Sims Metal
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Guidewire and Sims is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Guidewire Software and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management and Guidewire Software 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 Guidewire Software are associated (or correlated) with Sims Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Metal Management has no effect on the direction of Guidewire Software i.e., Guidewire Software and Sims Metal go up and down completely randomly.
Pair Corralation between Guidewire Software and Sims Metal
Assuming the 90 days trading horizon Guidewire Software is expected to generate 1.05 times more return on investment than Sims Metal. However, Guidewire Software is 1.05 times more volatile than Sims Metal Management. It trades about 0.11 of its potential returns per unit of risk. Sims Metal Management is currently generating about 0.0 per unit of risk. If you would invest 6,750 in Guidewire Software on November 30, 2024 and sell it today you would earn a total of 12,455 from holding Guidewire Software or generate 184.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Guidewire Software vs. Sims Metal Management
Performance |
| Timeline |
| Guidewire Software |
| Sims Metal Management |
Guidewire Software and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guidewire Software and Sims Metal
The main advantage of trading using opposite Guidewire Software and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guidewire Software position performs unexpectedly, Sims Metal 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 Sims Metal will offset losses from the drop in Sims Metal's long position.| Guidewire Software vs. AEON METALS LTD | Guidewire Software vs. NAGOYA RAILROAD | Guidewire Software vs. QUEEN S ROAD | Guidewire Software vs. East Africa Metals |
| Sims Metal vs. GRENKELEASING Dusseldorf | Sims Metal vs. WILLIS LEASE FIN | Sims Metal vs. ALBIS LEASING AG | Sims Metal vs. United Rentals |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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