Correlation Between Highlight Communications and Guidewire Software

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Can any of the company-specific risk be diversified away by investing in both Highlight Communications 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 Highlight Communications and Guidewire Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlight Communications AG and Guidewire Software, you can compare the effects of market volatilities on Highlight Communications 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 Highlight Communications with a short position of Guidewire Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and Guidewire Software.

Diversification Opportunities for Highlight Communications and Guidewire Software

-0.18
  Correlation Coefficient

Good diversification

The 3 months correlation between Highlight and Guidewire is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and Guidewire Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidewire Software and Highlight Communications 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 Highlight Communications AG 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 Highlight Communications i.e., Highlight Communications and Guidewire Software go up and down completely randomly.

Pair Corralation between Highlight Communications and Guidewire Software

Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 0.58 times more return on investment than Guidewire Software. However, Highlight Communications AG is 1.71 times less risky than Guidewire Software. It trades about 0.34 of its potential returns per unit of risk. Guidewire Software is currently generating about -0.13 per unit of risk. If you would invest  98.00  in Highlight Communications AG on September 13, 2024 and sell it today you would earn a total of  17.00  from holding Highlight Communications AG or generate 17.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Highlight Communications AG  vs.  Guidewire Software

 Performance 
       Timeline  
Highlight Communications 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Highlight Communications AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
Guidewire Software 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Guidewire Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Guidewire Software may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Highlight Communications and Guidewire Software Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Highlight Communications and Guidewire Software

The main advantage of trading using opposite Highlight Communications and Guidewire Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications 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.
The idea behind Highlight Communications AG and Guidewire Software 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.
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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