Correlation Between Software Circle and Kingfisher PLC

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

Diversification Opportunities for Software Circle and Kingfisher PLC

0.17

Correlation Coefficient

Software Circle  Kingfisher PLC

Average diversification

The 3 months correlation between Software and Kingfisher is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Software Circle plc and Kingfisher PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher PLC 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 Kingfisher PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingfisher PLC has no effect on the direction of Software Circle i.e., Software Circle and Kingfisher PLC go up and down completely randomly.

Pair Corralation between Software Circle and Kingfisher PLC

Assuming the 90 days trading horizon Software Circle plc is expected to generate 1.22 times more return on investment than Kingfisher PLC. However, Software Circle is 1.22 times more volatile than Kingfisher PLC. It trades about 0.11 of its potential returns per unit of risk. Kingfisher PLC is currently generating about 0.01 per unit of risk. If you would invest  788.00  in Software Circle plc on October 11, 2024 and sell it today you would earn a total of  1,562  from holding Software Circle plc or generate 198.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Software Circle plc  vs.  Kingfisher PLC

Software Circle plc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Software Circle plc are ranked lower than 6 (%) 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.

Kingfisher PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingfisher PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Software Circle and Kingfisher PLC

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

The idea behind Software Circle plc and Kingfisher 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.