Correlation Between TELES Informationstech and Guidewire Software

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

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

Diversification Opportunities for TELES Informationstech and Guidewire Software

-0.09

Correlation Coefficient

TELES Informationstech  Guidewire Software

Good diversification

The 3 months correlation between TELES and Guidewire is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding TELES Informationstechnologien and Guidewire Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidewire Software and TELES Informationstech 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 TELES Informationstechnologien AG 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 TELES Informationstech i.e., TELES Informationstech and Guidewire Software go up and down completely randomly.

Pair Corralation between TELES Informationstech and Guidewire Software

Assuming the 90 days trading horizon TELES Informationstechnologien AG is expected to under-perform the Guidewire Software. In addition to that, TELES Informationstech is 2.07 times more volatile than Guidewire Software. It trades about -0.06 of its total potential returns per unit of risk. Guidewire Software is currently generating about 0.1 per unit of volatility. If you would invest  6,400  in Guidewire Software on October 12, 2024 and sell it today you would earn a total of  10,245  from holding Guidewire Software or generate 160.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.6%
Values	Daily Returns

TELES Informationstechnologien  vs.  Guidewire Software

TELES Informationstech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TELES Informationstechnologien AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm 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 comparatively stable basic indicators, Guidewire Software is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TELES Informationstech and Guidewire Software

The main advantage of trading using opposite TELES Informationstech and Guidewire Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TELES Informationstech 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 TELES Informationstechnologien AG 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.