Correlation Between Software Circle and Martin Marietta

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

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

Diversification Opportunities for Software Circle and Martin Marietta

-0.81

Correlation Coefficient

Software Circle  Martin Marietta

Pay attention - limited upside

The 3 months correlation between Software and Martin is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Software Circle plc and Martin Marietta Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Marietta Materials and Software Circle 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 Software Circle plc are associated (or correlated) with Martin Marietta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Marietta Materials has no effect on the direction of Software Circle i.e., Software Circle and Martin Marietta go up and down completely randomly.

Pair Corralation between Software Circle and Martin Marietta

Assuming the 90 days trading horizon Software Circle plc is expected to generate 1.18 times more return on investment than Martin Marietta. However, Software Circle is 1.18 times more volatile than Martin Marietta Materials. It trades about 0.21 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about -0.08 per unit of risk. 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	Significant
Accuracy	84.13%
Values	Daily Returns

Software Circle plc  vs.  Martin Marietta Materials

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.

Martin Marietta Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Martin Marietta Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Software Circle and Martin Marietta

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

The idea behind Software Circle plc and Martin Marietta Materials 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.