Correlation Between Guidewire Software and AOI Electronics

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

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

Diversification Opportunities for Guidewire Software and AOI Electronics

-0.06

Correlation Coefficient

Guidewire Software  AOI Electronics

Good diversification

The 3 months correlation between Guidewire and AOI is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Guidewire Software and AOI Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AOI Electronics 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 AOI Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AOI Electronics has no effect on the direction of Guidewire Software i.e., Guidewire Software and AOI Electronics go up and down completely randomly.

Pair Corralation between Guidewire Software and AOI Electronics

Assuming the 90 days trading horizon Guidewire Software is expected to generate 20.29 times more return on investment than AOI Electronics. However, Guidewire Software is 20.29 times more volatile than AOI Electronics Co. It trades about 0.06 of its potential returns per unit of risk. AOI Electronics Co is currently generating about 0.13 per unit of risk. If you would invest  16,290  in Guidewire Software on December 30, 2024 and sell it today you would earn a total of  1,210  from holding Guidewire Software or generate 7.43% return on investment over 90 days.

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

Guidewire Software  vs.  AOI Electronics Co

Guidewire Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guidewire Software are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Guidewire Software may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AOI Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AOI Electronics Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AOI Electronics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Guidewire Software and AOI Electronics

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

The idea behind Guidewire Software and AOI Electronics Co 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 Stocks Directory module to find actively traded stocks across global markets.