Correlation Between Guidewire Software, and Netflix

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

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

Diversification Opportunities for Guidewire Software, and Netflix

0.59

Correlation Coefficient

Guidewire Software,  Netflix

Very weak diversification

The 3 months correlation between Guidewire and Netflix is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Guidewire Software, and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix 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 Netflix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netflix has no effect on the direction of Guidewire Software, i.e., Guidewire Software, and Netflix go up and down completely randomly.

Pair Corralation between Guidewire Software, and Netflix

Assuming the 90 days trading horizon Guidewire Software, is expected to generate 53.97 times less return on investment than Netflix. In addition to that, Guidewire Software, is 1.4 times more volatile than Netflix. It trades about 0.0 of its total potential returns per unit of risk. Netflix is currently generating about 0.24 per unit of volatility. If you would invest  8,502  in Netflix on October 23, 2024 and sell it today you would earn a total of  2,103  from holding Netflix or generate 24.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.44%
Values	Daily Returns

Guidewire Software,  vs.  Netflix

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. Despite somewhat strong basic indicators, Guidewire Software, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Netflix

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Netflix sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guidewire Software, and Netflix

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

The idea behind Guidewire Software, and Netflix 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.