Correlation Between Guidewire Software and Wayside Technology

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

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

Diversification Opportunities for Guidewire Software and Wayside Technology

0.4

Correlation Coefficient

Guidewire Software  Wayside Technology

Very weak diversification

The 3 months correlation between Guidewire and Wayside is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Guidewire Software and Wayside Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayside Technology 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 Wayside Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayside Technology has no effect on the direction of Guidewire Software i.e., Guidewire Software and Wayside Technology go up and down completely randomly.

Pair Corralation between Guidewire Software and Wayside Technology

Assuming the 90 days trading horizon Guidewire Software is expected to under-perform the Wayside Technology. But the stock apears to be less risky and, when comparing its historical volatility, Guidewire Software is 1.3 times less risky than Wayside Technology. The stock trades about -0.01 of its potential returns per unit of risk. The Wayside Technology Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  9,287  in Wayside Technology Group on October 11, 2024 and sell it today you would earn a total of  2,813  from holding Wayside Technology Group or generate 30.29% return on investment over 90 days.

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

Guidewire Software  vs.  Wayside Technology Group

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.

Wayside Technology

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wayside Technology Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Wayside Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guidewire Software and Wayside Technology

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

The idea behind Guidewire Software and Wayside Technology Group 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.