Correlation Between Guidewire Software, and Teladoc Health

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

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

Diversification Opportunities for Guidewire Software, and Teladoc Health

0.74

Correlation Coefficient

Guidewire Software,  Teladoc Health

Poor diversification

The 3 months correlation between Guidewire and Teladoc is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Guidewire Software, and Teladoc Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teladoc Health 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 Teladoc Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teladoc Health has no effect on the direction of Guidewire Software, i.e., Guidewire Software, and Teladoc Health go up and down completely randomly.

Pair Corralation between Guidewire Software, and Teladoc Health

Assuming the 90 days trading horizon Guidewire Software, is expected to under-perform the Teladoc Health. But the stock apears to be less risky and, when comparing its historical volatility, Guidewire Software, is 1.87 times less risky than Teladoc Health. The stock trades about -0.03 of its potential returns per unit of risk. The Teladoc Health is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  176.00  in Teladoc Health on October 7, 2024 and sell it today you would earn a total of  17.00  from holding Teladoc Health or generate 9.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Guidewire Software,  vs.  Teladoc Health

Guidewire Software,

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guidewire Software, are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Teladoc Health

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teladoc Health are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Teladoc Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guidewire Software, and Teladoc Health

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

The idea behind Guidewire Software, and Teladoc Health 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.