Correlation Between Air Transport and Guidewire Software

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

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

Diversification Opportunities for Air Transport and Guidewire Software

0.4

Correlation Coefficient

Air Transport  Guidewire Software

Very weak diversification

The 3 months correlation between Air and Guidewire is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Guidewire Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidewire Software and Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and Guidewire Software go up and down completely randomly.

Pair Corralation between Air Transport and Guidewire Software

Assuming the 90 days horizon Air Transport Services is expected to generate 1.34 times more return on investment than Guidewire Software. However, Air Transport is 1.34 times more volatile than Guidewire Software. It trades about 0.23 of its potential returns per unit of risk. Guidewire Software is currently generating about 0.0 per unit of risk. If you would invest  1,360  in Air Transport Services on October 9, 2024 and sell it today you would earn a total of  760.00  from holding Air Transport Services or generate 55.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Air Transport Services  vs.  Guidewire Software

Air Transport Services

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Air Transport and Guidewire Software

The main advantage of trading using opposite Air Transport and Guidewire Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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 Air Transport Services 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.