Correlation Between Guidewire Software and Snowflake

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

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

Diversification Opportunities for Guidewire Software and Snowflake

0.62

Correlation Coefficient

Guidewire Software  Snowflake

Poor diversification

The 3 months correlation between Guidewire and Snowflake is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Guidewire Software and Snowflake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snowflake 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 Snowflake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snowflake has no effect on the direction of Guidewire Software i.e., Guidewire Software and Snowflake go up and down completely randomly.

Pair Corralation between Guidewire Software and Snowflake

Given the investment horizon of 90 days Guidewire Software is expected to generate 0.97 times more return on investment than Snowflake. However, Guidewire Software is 1.03 times less risky than Snowflake. It trades about 0.33 of its potential returns per unit of risk. Snowflake is currently generating about 0.27 per unit of risk. If you would invest  10,979  in Guidewire Software on February 20, 2024 and sell it today you would earn a total of  1,313  from holding Guidewire Software or generate 11.96% return on investment over 90 days.

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

Guidewire Software  vs.  Snowflake

Guidewire Software

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guidewire Software are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Snowflake

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Snowflake has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Guidewire Software and Snowflake

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

The idea behind Guidewire Software and Snowflake 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.