Correlation Between Guidewire Software and DoubleVerify Holdings

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

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

Diversification Opportunities for Guidewire Software and DoubleVerify Holdings

0.17

Correlation Coefficient

Guidewire Software  DoubleVerify Holdings

Average diversification

The 3 months correlation between Guidewire and DoubleVerify is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Guidewire Software and DoubleVerify Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DoubleVerify Holdings 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 DoubleVerify Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DoubleVerify Holdings has no effect on the direction of Guidewire Software i.e., Guidewire Software and DoubleVerify Holdings go up and down completely randomly.

Pair Corralation between Guidewire Software and DoubleVerify Holdings

Given the investment horizon of 90 days Guidewire Software is expected to generate 0.84 times more return on investment than DoubleVerify Holdings. However, Guidewire Software is 1.19 times less risky than DoubleVerify Holdings. It trades about 0.29 of its potential returns per unit of risk. DoubleVerify Holdings is currently generating about 0.05 per unit of risk. If you would invest  14,614  in Guidewire Software on September 2, 2024 and sell it today you would earn a total of  5,675  from holding Guidewire Software or generate 38.83% return on investment over 90 days.

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

Guidewire Software  vs.  DoubleVerify Holdings

Guidewire Software

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guidewire Software are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Guidewire Software exhibited solid returns over the last few months and may actually be approaching a breakup point.

DoubleVerify Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DoubleVerify Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, DoubleVerify Holdings is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Guidewire Software and DoubleVerify Holdings

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

The idea behind Guidewire Software and DoubleVerify Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.