Correlation Between Guidewire Software and S A P
Can any of the company-specific risk be diversified away by investing in both Guidewire Software and S A P 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 S A P into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guidewire Software and SAP SE ADR, you can compare the effects of market volatilities on Guidewire Software and S A P 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 S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidewire Software and S A P.
Diversification Opportunities for Guidewire Software and S A P
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Guidewire and SAP is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Guidewire Software and SAP SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE ADR 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE ADR has no effect on the direction of Guidewire Software i.e., Guidewire Software and S A P go up and down completely randomly.
Pair Corralation between Guidewire Software and S A P
Given the investment horizon of 90 days Guidewire Software is expected to generate 0.76 times more return on investment than S A P. However, Guidewire Software is 1.31 times less risky than S A P. It trades about 0.32 of its potential returns per unit of risk. SAP SE ADR is currently generating about -0.02 per unit of risk. If you would invest 18,805 in Guidewire Software on August 25, 2024 and sell it today you would earn a total of 1,477 from holding Guidewire Software or generate 7.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guidewire Software vs. SAP SE ADR
Performance |
| Timeline |
| Guidewire Software |
| SAP SE ADR |
Guidewire Software and S A P Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guidewire Software and S A P
The main advantage of trading using opposite Guidewire Software and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guidewire Software position performs unexpectedly, S A P 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 S A P will offset losses from the drop in S A P's long position.| Guidewire Software vs. Blackbaud | Guidewire Software vs. Enfusion | Guidewire Software vs. E2open Parent Holdings | Guidewire Software vs. Manhattan Associates |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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