Correlation Between China Merchants and Guidewire Software
Can any of the company-specific risk be diversified away by investing in both China Merchants and Guidewire Software 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 China Merchants and Guidewire Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Merchants Port and Guidewire Software, you can compare the effects of market volatilities on China Merchants and Guidewire Software 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 China Merchants with a short position of Guidewire Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Guidewire Software.
Diversification Opportunities for China Merchants and Guidewire Software
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Guidewire is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Port and Guidewire Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidewire Software and China Merchants 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 China Merchants Port are associated (or correlated) with Guidewire Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidewire Software has no effect on the direction of China Merchants i.e., China Merchants and Guidewire Software go up and down completely randomly.
Pair Corralation between China Merchants and Guidewire Software
Assuming the 90 days horizon China Merchants Port is expected to generate 0.38 times more return on investment than Guidewire Software. However, China Merchants Port is 2.66 times less risky than Guidewire Software. It trades about 0.18 of its potential returns per unit of risk. Guidewire Software is currently generating about -0.13 per unit of risk. If you would invest 147.00 in China Merchants Port on September 13, 2024 and sell it today you would earn a total of 8.00 from holding China Merchants Port or generate 5.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Merchants Port vs. Guidewire Software
Performance |
| Timeline |
| China Merchants Port |
| Guidewire Software |
China Merchants and Guidewire Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Guidewire Software
The main advantage of trading using opposite China Merchants and Guidewire Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Guidewire Software 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 Guidewire Software will offset losses from the drop in Guidewire Software's long position.| China Merchants vs. Tower One Wireless | China Merchants vs. Zoom Video Communications | China Merchants vs. Infrastrutture Wireless Italiane | China Merchants vs. CITY OFFICE REIT |
| Guidewire Software vs. Apple Inc | Guidewire Software vs. Apple Inc | Guidewire Software vs. Apple Inc | Guidewire Software vs. Apple Inc |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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