Correlation Between Circa Group and SoftOx Solutions

Can any of the company-specific risk be diversified away by investing in both Circa Group and SoftOx Solutions 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 Circa Group and SoftOx Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Circa Group AS and SoftOx Solutions AS, you can compare the effects of market volatilities on Circa Group and SoftOx Solutions 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 Circa Group with a short position of SoftOx Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Circa Group and SoftOx Solutions.

Diversification Opportunities for Circa Group and SoftOx Solutions

-0.62

Correlation Coefficient

Circa Group  SoftOx Solutions

Excellent diversification

The 3 months correlation between Circa and SoftOx is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Circa Group AS and SoftOx Solutions AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoftOx Solutions and Circa Group 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 Circa Group AS are associated (or correlated) with SoftOx Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoftOx Solutions has no effect on the direction of Circa Group i.e., Circa Group and SoftOx Solutions go up and down completely randomly.

Pair Corralation between Circa Group and SoftOx Solutions

Assuming the 90 days trading horizon Circa Group AS is expected to generate 0.69 times more return on investment than SoftOx Solutions. However, Circa Group AS is 1.44 times less risky than SoftOx Solutions. It trades about 0.1 of its potential returns per unit of risk. SoftOx Solutions AS is currently generating about -0.12 per unit of risk. If you would invest  49.00  in Circa Group AS on August 31, 2024 and sell it today you would earn a total of  15.00  from holding Circa Group AS or generate 30.61% return on investment over 90 days.

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

Circa Group AS  vs.  SoftOx Solutions AS

Circa Group AS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Circa Group AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Circa Group displayed solid returns over the last few months and may actually be approaching a breakup point.

SoftOx Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SoftOx Solutions AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Circa Group and SoftOx Solutions

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

The idea behind Circa Group AS and SoftOx Solutions AS 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.