Correlation Between Aquagold International and Guidewire Software

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

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

Diversification Opportunities for Aquagold International and Guidewire Software

0.48

Correlation Coefficient

Aquagold International  Guidewire Software

Very weak diversification

The 3 months correlation between Aquagold and Guidewire is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Aquagold International and Guidewire Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidewire Software and Aquagold International 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 Aquagold International 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 Aquagold International i.e., Aquagold International and Guidewire Software go up and down completely randomly.

Pair Corralation between Aquagold International and Guidewire Software

Given the investment horizon of 90 days Aquagold International is expected to under-perform the Guidewire Software. In addition to that, Aquagold International is 6.32 times more volatile than Guidewire Software. It trades about -0.22 of its total potential returns per unit of risk. Guidewire Software is currently generating about -0.28 per unit of volatility. If you would invest  20,657  in Guidewire Software on October 6, 2024 and sell it today you would lose (3,707) from holding Guidewire Software or give up 17.95% of portfolio value over 90 days.

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

Aquagold International  vs.  Guidewire Software

Aquagold International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquagold International 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 rather sound basic indicators, Guidewire Software is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aquagold International and Guidewire Software

The main advantage of trading using opposite Aquagold International and Guidewire Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aquagold International 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 Aquagold International 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.