Correlation Between Guidewire Software and LEGAL GENERAL

Can any of the company-specific risk be diversified away by investing in both Guidewire Software and LEGAL GENERAL 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 LEGAL GENERAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guidewire Software and LEGAL GENERAL, you can compare the effects of market volatilities on Guidewire Software and LEGAL GENERAL 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 LEGAL GENERAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidewire Software and LEGAL GENERAL.

Diversification Opportunities for Guidewire Software and LEGAL GENERAL

-0.57

Correlation Coefficient

Guidewire Software  LEGAL GENERAL

Excellent diversification

The 3 months correlation between Guidewire and LEGAL is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Guidewire Software and LEGAL GENERAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEGAL GENERAL 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 LEGAL GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEGAL GENERAL has no effect on the direction of Guidewire Software i.e., Guidewire Software and LEGAL GENERAL go up and down completely randomly.

Pair Corralation between Guidewire Software and LEGAL GENERAL

Assuming the 90 days trading horizon Guidewire Software is expected to under-perform the LEGAL GENERAL. In addition to that, Guidewire Software is 2.13 times more volatile than LEGAL GENERAL. It trades about -0.01 of its total potential returns per unit of risk. LEGAL GENERAL is currently generating about 0.07 per unit of volatility. If you would invest  267.00  in LEGAL GENERAL on October 11, 2024 and sell it today you would earn a total of  12.00  from holding LEGAL GENERAL or generate 4.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Guidewire Software  vs.  LEGAL GENERAL

Guidewire Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guidewire Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Guidewire Software is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

LEGAL GENERAL

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LEGAL GENERAL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, LEGAL GENERAL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Guidewire Software and LEGAL GENERAL

The main advantage of trading using opposite Guidewire Software and LEGAL GENERAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guidewire Software position performs unexpectedly, LEGAL GENERAL 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 LEGAL GENERAL will offset losses from the drop in LEGAL GENERAL's long position.

The idea behind Guidewire Software and LEGAL GENERAL 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.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.