Correlation Between Applied Materials, and Guidewire Software,

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

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

Diversification Opportunities for Applied Materials, and Guidewire Software,

-0.66

Correlation Coefficient

Applied Materials,  Guidewire Software,

Excellent diversification

The 3 months correlation between Applied and Guidewire is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials, and Guidewire Software, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidewire Software, and Applied Materials, 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 Applied Materials, are associated (or correlated) with Guidewire Software,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidewire Software, has no effect on the direction of Applied Materials, i.e., Applied Materials, and Guidewire Software, go up and down completely randomly.

Pair Corralation between Applied Materials, and Guidewire Software,

Assuming the 90 days trading horizon Applied Materials, is expected to under-perform the Guidewire Software,. In addition to that, Applied Materials, is 1.96 times more volatile than Guidewire Software,. It trades about -0.08 of its total potential returns per unit of risk. Guidewire Software, is currently generating about 0.11 per unit of volatility. If you would invest  9,005  in Guidewire Software, on December 26, 2024 and sell it today you would earn a total of  736.00  from holding Guidewire Software, or generate 8.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	83.33%
Values	Daily Returns

Applied Materials,  vs.  Guidewire Software,

Applied Materials,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Materials, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Guidewire Software,

Risk-Adjusted Performance

OK

Over the last 90 days Guidewire Software, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Guidewire Software, may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Applied Materials, and Guidewire Software,

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

The idea behind Applied Materials, and Guidewire Software, 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.