Correlation Between Canadian General and Software Circle

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

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

Diversification Opportunities for Canadian General and Software Circle

0.13

Correlation Coefficient

Canadian General  Software Circle

Average diversification

The 3 months correlation between Canadian and Software is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Canadian General Investments 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 Canadian General 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 Canadian General Investments 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 Canadian General i.e., Canadian General and Software Circle go up and down completely randomly.

Pair Corralation between Canadian General and Software Circle

Assuming the 90 days trading horizon Canadian General Investments is expected to generate 1.06 times more return on investment than Software Circle. However, Canadian General is 1.06 times more volatile than Software Circle plc. It trades about 0.09 of its potential returns per unit of risk. Software Circle plc is currently generating about 0.07 per unit of risk. If you would invest  208,765  in Canadian General Investments on October 8, 2024 and sell it today you would earn a total of  17,235  from holding Canadian General Investments or generate 8.26% return on investment over 90 days.

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

Canadian General Investments  vs.  Software Circle plc

Canadian General Inv

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian General Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Canadian General may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Software Circle plc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Software Circle plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Software Circle may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Canadian General and Software Circle

The main advantage of trading using opposite Canadian General and Software Circle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian General 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 Canadian General Investments 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.