Correlation Between Central Asia and Software Circle

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

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

Diversification Opportunities for Central Asia and Software Circle

0.68

Correlation Coefficient

Central Asia  Software Circle

Poor diversification

The 3 months correlation between Central and Software is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and Software Circle plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Circle plc and Central Asia 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 Central Asia Metals are associated (or correlated) with Software Circle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Circle plc has no effect on the direction of Central Asia i.e., Central Asia and Software Circle go up and down completely randomly.

Pair Corralation between Central Asia and Software Circle

Assuming the 90 days trading horizon Central Asia Metals is expected to under-perform the Software Circle. But the stock apears to be less risky and, when comparing its historical volatility, Central Asia Metals is 1.36 times less risky than Software Circle. The stock trades about -0.03 of its potential returns per unit of risk. The Software Circle plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,750  in Software Circle plc on April 16, 2025 and sell it today you would earn a total of  150.00  from holding Software Circle plc or generate 5.45% return on investment over 90 days.

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

Central Asia Metals  vs.  Software Circle plc

Central Asia Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Central Asia is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Software Circle plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Software Circle plc are ranked lower than 3 (%) 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 August 2025.

Pair Trading with Central Asia and Software Circle

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

The idea behind Central Asia Metals and Software Circle 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.