Correlation Between Guidewire Software and Workday

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

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

Diversification Opportunities for Guidewire Software and Workday

-0.13

Correlation Coefficient

Guidewire Software  Workday

Good diversification

The 3 months correlation between Guidewire and Workday is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Guidewire Software and Workday in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workday 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 Workday. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workday has no effect on the direction of Guidewire Software i.e., Guidewire Software and Workday go up and down completely randomly.

Pair Corralation between Guidewire Software and Workday

Given the investment horizon of 90 days Guidewire Software is expected to under-perform the Workday. But the stock apears to be less risky and, when comparing its historical volatility, Guidewire Software is 1.01 times less risky than Workday. The stock trades about -0.06 of its potential returns per unit of risk. The Workday is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  24,483  in Workday on October 15, 2024 and sell it today you would earn a total of  488.00  from holding Workday or generate 1.99% return on investment over 90 days.

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

Guidewire Software  vs.  Workday

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 latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Workday

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Workday are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Workday is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guidewire Software and Workday

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

The idea behind Guidewire Software and Workday 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.