Correlation Between Fair Isaac and Guidewire Software

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

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

Diversification Opportunities for Fair Isaac and Guidewire Software

0.92

Correlation Coefficient

Fair Isaac  Guidewire Software

Almost no diversification

The 3 months correlation between Fair and Guidewire is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fair Isaac Corp and Guidewire Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidewire Software and Fair Isaac 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 Fair Isaac Corp 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 Fair Isaac i.e., Fair Isaac and Guidewire Software go up and down completely randomly.

Pair Corralation between Fair Isaac and Guidewire Software

Assuming the 90 days trading horizon Fair Isaac Corp is expected to generate 1.15 times more return on investment than Guidewire Software. However, Fair Isaac is 1.15 times more volatile than Guidewire Software. It trades about 0.33 of its potential returns per unit of risk. Guidewire Software is currently generating about 0.35 per unit of risk. If you would invest  151,600  in Fair Isaac Corp on September 4, 2024 and sell it today you would earn a total of  75,400  from holding Fair Isaac Corp or generate 49.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

Fair Isaac Corp  vs.  Guidewire Software

Fair Isaac Corp

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac Corp are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fair Isaac unveiled solid returns over the last few months and may actually be approaching a breakup point.

Guidewire Software

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Guidewire Software are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Guidewire Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fair Isaac and Guidewire Software

The main advantage of trading using opposite Fair Isaac and Guidewire Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fair Isaac 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 Fair Isaac Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.