Correlation Between Guidewire Software and Atea ASA

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

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

Diversification Opportunities for Guidewire Software and Atea ASA

0.17

Correlation Coefficient

Guidewire Software  Atea ASA

Average diversification

The 3 months correlation between Guidewire and Atea is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Guidewire Software and Atea ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atea ASA 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 Atea ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atea ASA has no effect on the direction of Guidewire Software i.e., Guidewire Software and Atea ASA go up and down completely randomly.

Pair Corralation between Guidewire Software and Atea ASA

Assuming the 90 days trading horizon Guidewire Software is expected to under-perform the Atea ASA. In addition to that, Guidewire Software is 1.25 times more volatile than Atea ASA. It trades about -0.04 of its total potential returns per unit of risk. Atea ASA is currently generating about 0.08 per unit of volatility. If you would invest  1,186  in Atea ASA on October 9, 2024 and sell it today you would earn a total of  20.00  from holding Atea ASA or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Guidewire Software  vs.  Atea ASA

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Atea ASA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atea ASA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Atea ASA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guidewire Software and Atea ASA

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

The idea behind Guidewire Software and Atea ASA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.