Correlation Between Guidewire Software and SCOTT TECHNOLOGY
Can any of the company-specific risk be diversified away by investing in both Guidewire Software and SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guidewire Software and SCOTT TECHNOLOGY, you can compare the effects of market volatilities on Guidewire Software and SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidewire Software and SCOTT TECHNOLOGY.
Diversification Opportunities for Guidewire Software and SCOTT TECHNOLOGY
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Guidewire and SCOTT is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Guidewire Software and SCOTT TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOTT TECHNOLOGY has no effect on the direction of Guidewire Software i.e., Guidewire Software and SCOTT TECHNOLOGY go up and down completely randomly.
Pair Corralation between Guidewire Software and SCOTT TECHNOLOGY
Assuming the 90 days trading horizon Guidewire Software is expected to generate 0.71 times more return on investment than SCOTT TECHNOLOGY. However, Guidewire Software is 1.41 times less risky than SCOTT TECHNOLOGY. It trades about 0.19 of its potential returns per unit of risk. SCOTT TECHNOLOGY is currently generating about 0.01 per unit of risk. If you would invest 16,600 in Guidewire Software on October 20, 2024 and sell it today you would earn a total of 815.00 from holding Guidewire Software or generate 4.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guidewire Software vs. SCOTT TECHNOLOGY
Performance |
| Timeline |
| Guidewire Software |
| SCOTT TECHNOLOGY |
Guidewire Software and SCOTT TECHNOLOGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guidewire Software and SCOTT TECHNOLOGY
The main advantage of trading using opposite Guidewire Software and SCOTT TECHNOLOGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guidewire Software position performs unexpectedly, SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY will offset losses from the drop in SCOTT TECHNOLOGY's long position.| Guidewire Software vs. Universal Entertainment | Guidewire Software vs. HUTCHISON TELECOMM | Guidewire Software vs. PT Global Mediacom | Guidewire Software vs. TOWNSQUARE MEDIA INC |
| SCOTT TECHNOLOGY vs. Magic Software Enterprises | SCOTT TECHNOLOGY vs. Constellation Software | SCOTT TECHNOLOGY vs. Take Two Interactive Software | SCOTT TECHNOLOGY vs. Guidewire Software |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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