Correlation Between Sekisui House and Guidewire Software

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

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

Diversification Opportunities for Sekisui House and Guidewire Software

-0.45

Correlation Coefficient

Sekisui House  Guidewire Software

Very good diversification

The 3 months correlation between Sekisui and Guidewire is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sekisui House and Guidewire Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidewire Software and Sekisui House 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 Sekisui House 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 Sekisui House i.e., Sekisui House and Guidewire Software go up and down completely randomly.

Pair Corralation between Sekisui House and Guidewire Software

Assuming the 90 days trading horizon Sekisui House is expected to generate 20.06 times less return on investment than Guidewire Software. But when comparing it to its historical volatility, Sekisui House is 1.28 times less risky than Guidewire Software. It trades about 0.01 of its potential returns per unit of risk. Guidewire Software is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  16,135  in Guidewire Software on October 11, 2024 and sell it today you would earn a total of  335.00  from holding Guidewire Software or generate 2.08% return on investment over 90 days.

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

Sekisui House  vs.  Guidewire Software

Sekisui House

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sekisui House has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Sekisui House is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 comparatively stable basic indicators, Guidewire Software is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sekisui House and Guidewire Software

The main advantage of trading using opposite Sekisui House and Guidewire Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sekisui House 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 Sekisui House 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.