Correlation Between CK Hutchison and Guidewire Software

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

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

Diversification Opportunities for CK Hutchison and Guidewire Software

-0.58

Correlation Coefficient

CK Hutchison  Guidewire Software

Excellent diversification

The 3 months correlation between 2CK and Guidewire is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding CK Hutchison Holdings and Guidewire Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidewire Software and CK Hutchison 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 CK Hutchison Holdings 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 CK Hutchison i.e., CK Hutchison and Guidewire Software go up and down completely randomly.

Pair Corralation between CK Hutchison and Guidewire Software

Assuming the 90 days horizon CK Hutchison Holdings is expected to generate 0.48 times more return on investment than Guidewire Software. However, CK Hutchison Holdings is 2.1 times less risky than Guidewire Software. It trades about 0.09 of its potential returns per unit of risk. Guidewire Software is currently generating about -0.18 per unit of risk. If you would invest  486.00  in CK Hutchison Holdings on September 24, 2024 and sell it today you would earn a total of  16.00  from holding CK Hutchison Holdings or generate 3.29% return on investment over 90 days.

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

CK Hutchison Holdings  vs.  Guidewire Software

CK Hutchison Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CK Hutchison Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CK Hutchison 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

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 CK Hutchison and Guidewire Software

The main advantage of trading using opposite CK Hutchison and Guidewire Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CK Hutchison 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 CK Hutchison Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..