Correlation Between Materialise and Guidewire Software

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

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

Diversification Opportunities for Materialise and Guidewire Software

0.56

Correlation Coefficient

Materialise  Guidewire Software

Very weak diversification

The 3 months correlation between Materialise and Guidewire is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Materialise NV and Guidewire Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidewire Software and Materialise 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 Materialise NV 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 Materialise i.e., Materialise and Guidewire Software go up and down completely randomly.

Pair Corralation between Materialise and Guidewire Software

Assuming the 90 days trading horizon Materialise NV is expected to generate 1.67 times more return on investment than Guidewire Software. However, Materialise is 1.67 times more volatile than Guidewire Software. It trades about 0.2 of its potential returns per unit of risk. Guidewire Software is currently generating about 0.04 per unit of risk. If you would invest  458.00  in Materialise NV on September 19, 2024 and sell it today you would earn a total of  292.00  from holding Materialise NV or generate 63.76% return on investment over 90 days.

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

Materialise NV  vs.  Guidewire Software

Materialise NV

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Guidewire Software

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guidewire Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Guidewire Software may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Materialise and Guidewire Software

The main advantage of trading using opposite Materialise and Guidewire Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materialise 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 Materialise NV 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.