Correlation Between Binance Coin and Software Circle

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

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

Diversification Opportunities for Binance Coin and Software Circle

-0.7

Correlation Coefficient

Binance Coin  Software Circle

Excellent diversification

The 3 months correlation between Binance and Software is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Binance Coin and Software Circle plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Circle plc and Binance Coin 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 Binance Coin are associated (or correlated) with Software Circle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Circle plc has no effect on the direction of Binance Coin i.e., Binance Coin and Software Circle go up and down completely randomly.

Pair Corralation between Binance Coin and Software Circle

Assuming the 90 days trading horizon Binance Coin is expected to under-perform the Software Circle. In addition to that, Binance Coin is 1.5 times more volatile than Software Circle plc. It trades about -0.04 of its total potential returns per unit of risk. Software Circle plc is currently generating about 0.21 per unit of volatility. If you would invest  2,300  in Software Circle plc on December 23, 2024 and sell it today you would earn a total of  700.00  from holding Software Circle plc or generate 30.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Binance Coin  vs.  Software Circle plc

Binance Coin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Binance Coin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Binance Coin shareholders.

Software Circle plc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Software Circle plc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Software Circle exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Binance Coin and Software Circle

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

The idea behind Binance Coin and Software Circle plc 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.