Correlation Between Workday and Guidewire Software

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

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

Diversification Opportunities for Workday and Guidewire Software

-0.03

Correlation Coefficient

Workday  Guidewire Software

Good diversification

The 3 months correlation between Workday and Guidewire is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Workday and Guidewire Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidewire Software and Workday 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 Workday 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 Workday i.e., Workday and Guidewire Software go up and down completely randomly.

Pair Corralation between Workday and Guidewire Software

Given the investment horizon of 90 days Workday is expected to generate 1.23 times less return on investment than Guidewire Software. In addition to that, Workday is 1.03 times more volatile than Guidewire Software. It trades about 0.08 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  13,899  in Guidewire Software on September 27, 2024 and sell it today you would earn a total of  3,563  from holding Guidewire Software or generate 25.63% return on investment over 90 days.

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

Workday  vs.  Guidewire Software

Workday

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Workday are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Workday may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 rather sound basic indicators, Guidewire Software is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Workday and Guidewire Software

The main advantage of trading using opposite Workday and Guidewire Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workday 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 Workday 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.