Correlation Between Guidewire Software and Talanx AG

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

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

Diversification Opportunities for Guidewire Software and Talanx AG

0.02

Correlation Coefficient

Guidewire Software  Talanx AG

Significant diversification

The 3 months correlation between Guidewire and Talanx is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Guidewire Software and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG 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 Talanx AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talanx AG has no effect on the direction of Guidewire Software i.e., Guidewire Software and Talanx AG go up and down completely randomly.

Pair Corralation between Guidewire Software and Talanx AG

Assuming the 90 days trading horizon Guidewire Software is expected to generate 1.13 times more return on investment than Talanx AG. However, Guidewire Software is 1.13 times more volatile than Talanx AG. It trades about 0.06 of its potential returns per unit of risk. Talanx AG is currently generating about -0.05 per unit of risk. If you would invest  16,500  in Guidewire Software on October 8, 2024 and sell it today you would earn a total of  200.00  from holding Guidewire Software or generate 1.21% 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.  Talanx AG

Guidewire Software

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guidewire Software are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Talanx AG

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Talanx AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guidewire Software and Talanx AG

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

The idea behind Guidewire Software and Talanx AG 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.