Correlation Between PTC and Guidewire Software

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

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

Diversification Opportunities for PTC and Guidewire Software

0.31

Correlation Coefficient

PTC  Guidewire Software

Weak diversification

The 3 months correlation between PTC and Guidewire is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding PTC Inc and Guidewire Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidewire Software and PTC 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 PTC Inc 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 PTC i.e., PTC and Guidewire Software go up and down completely randomly.

Pair Corralation between PTC and Guidewire Software

Considering the 90-day investment horizon PTC is expected to generate 2.66 times less return on investment than Guidewire Software. But when comparing it to its historical volatility, PTC Inc is 1.62 times less risky than Guidewire Software. It trades about 0.06 of its potential returns per unit of risk. Guidewire Software is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,836  in Guidewire Software on October 3, 2024 and sell it today you would earn a total of  10,022  from holding Guidewire Software or generate 146.61% return on investment over 90 days.

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

PTC Inc  vs.  Guidewire Software

PTC Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PTC Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, PTC is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 unfluctuating 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.

Pair Trading with PTC and Guidewire Software

The main advantage of trading using opposite PTC and Guidewire Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PTC 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 PTC Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.