Correlation Between Blackline and Guidewire Software

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

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

Diversification Opportunities for Blackline and Guidewire Software

0.06

Correlation Coefficient

Blackline  Guidewire Software

Significant diversification

The 3 months correlation between Blackline and Guidewire is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Blackline and Guidewire Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidewire Software and Blackline 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 Blackline 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 Blackline i.e., Blackline and Guidewire Software go up and down completely randomly.

Pair Corralation between Blackline and Guidewire Software

Allowing for the 90-day total investment horizon Blackline is expected to under-perform the Guidewire Software. In addition to that, Blackline is 1.13 times more volatile than Guidewire Software. It trades about -0.1 of its total potential returns per unit of risk. Guidewire Software is currently generating about 0.08 per unit of volatility. If you would invest  16,886  in Guidewire Software on December 30, 2024 and sell it today you would earn a total of  1,861  from holding Guidewire Software or generate 11.02% return on investment over 90 days.

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

Blackline  vs.  Guidewire Software

Blackline

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackline has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Guidewire Software

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guidewire Software are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Guidewire Software exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blackline and Guidewire Software

The main advantage of trading using opposite Blackline and Guidewire Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackline 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 Blackline 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.