Correlation Between Guidewire Software and Blackline

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

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

Diversification Opportunities for Guidewire Software and Blackline

0.07

Correlation Coefficient

Guidewire Software  Blackline

Significant diversification

The 3 months correlation between Guidewire and Blackline is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Guidewire Software and Blackline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackline 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 Blackline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackline has no effect on the direction of Guidewire Software i.e., Guidewire Software and Blackline go up and down completely randomly.

Pair Corralation between Guidewire Software and Blackline

Given the investment horizon of 90 days Guidewire Software is expected to generate 0.9 times more return on investment than Blackline. However, Guidewire Software is 1.11 times less risky than Blackline. It trades about 0.06 of its potential returns per unit of risk. Blackline is currently generating about -0.05 per unit of risk. If you would invest  19,637  in Guidewire Software on November 19, 2024 and sell it today you would earn a total of  1,578  from holding Guidewire Software or generate 8.04% return on investment over 90 days.

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

Guidewire Software  vs.  Blackline

Guidewire Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guidewire Software are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Guidewire Software may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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 latest inconsistent performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Guidewire Software and Blackline

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

The idea behind Guidewire Software and Blackline 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.