Correlation Between Software Circle and GreenX Metals

Can any of the company-specific risk be diversified away by investing in both Software Circle and GreenX Metals 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 GreenX Metals 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 GreenX Metals, you can compare the effects of market volatilities on Software Circle and GreenX Metals 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 GreenX Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Software Circle and GreenX Metals.

Diversification Opportunities for Software Circle and GreenX Metals

0.66

Correlation Coefficient

Software Circle  GreenX Metals

Poor diversification

The 3 months correlation between Software and GreenX is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Software Circle plc and GreenX Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenX Metals 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 GreenX Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenX Metals has no effect on the direction of Software Circle i.e., Software Circle and GreenX Metals go up and down completely randomly.

Pair Corralation between Software Circle and GreenX Metals

Assuming the 90 days trading horizon Software Circle plc is expected to generate 0.96 times more return on investment than GreenX Metals. However, Software Circle plc is 1.04 times less risky than GreenX Metals. It trades about 0.22 of its potential returns per unit of risk. GreenX Metals is currently generating about 0.2 per unit of risk. If you would invest  2,300  in Software Circle plc on December 22, 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Software Circle plc  vs.  GreenX Metals

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 17 (%) 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.

GreenX Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GreenX Metals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, GreenX Metals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Software Circle and GreenX Metals

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

The idea behind Software Circle plc and GreenX Metals 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.