Correlation Between Software Circle and Supermarket Income

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

Diversification Opportunities for Software Circle and Supermarket Income

0.71

Correlation Coefficient

Software Circle  Supermarket Income

Poor diversification

The 3 months correlation between Software and Supermarket is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Software Circle plc and Supermarket Income REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supermarket Income REIT 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 Supermarket Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supermarket Income REIT has no effect on the direction of Software Circle i.e., Software Circle and Supermarket Income go up and down completely randomly.

Pair Corralation between Software Circle and Supermarket Income

Assuming the 90 days trading horizon Software Circle plc is expected to generate 1.59 times more return on investment than Supermarket Income. However, Software Circle is 1.59 times more volatile than Supermarket Income REIT. It trades about 0.23 of its potential returns per unit of risk. Supermarket Income REIT is currently generating about 0.15 per unit of risk. If you would invest  2,300  in Software Circle plc on December 26, 2024 and sell it today you would earn a total of  800.00  from holding Software Circle plc or generate 34.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Software Circle plc  vs.  Supermarket Income REIT

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 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Software Circle exhibited solid returns over the last few months and may actually be approaching a breakup point.

Supermarket Income REIT

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Supermarket Income REIT are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Supermarket Income unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Software Circle and Supermarket Income

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

The idea behind Software Circle plc and Supermarket Income REIT 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.