Correlation Between Inspiration Healthcare and Software Circle

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

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

Diversification Opportunities for Inspiration Healthcare and Software Circle

0.59

Correlation Coefficient

Inspiration Healthcare  Software Circle

Very weak diversification

The 3 months correlation between Inspiration and Software is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Inspiration Healthcare Group 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 Inspiration Healthcare 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 Inspiration Healthcare Group 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 Inspiration Healthcare i.e., Inspiration Healthcare and Software Circle go up and down completely randomly.

Pair Corralation between Inspiration Healthcare and Software Circle

Assuming the 90 days trading horizon Inspiration Healthcare Group is expected to generate 1.52 times more return on investment than Software Circle. However, Inspiration Healthcare is 1.52 times more volatile than Software Circle plc. It trades about 0.13 of its potential returns per unit of risk. Software Circle plc is currently generating about 0.04 per unit of risk. If you would invest  1,650  in Inspiration Healthcare Group on April 21, 2025 and sell it today you would earn a total of  450.00  from holding Inspiration Healthcare Group or generate 27.27% return on investment over 90 days.

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

Inspiration Healthcare Group  vs.  Software Circle plc

Inspiration Healthcare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inspiration Healthcare Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Inspiration Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Software Circle plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Software Circle plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Software Circle is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Inspiration Healthcare and Software Circle

The main advantage of trading using opposite Inspiration Healthcare and Software Circle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inspiration Healthcare 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 Inspiration Healthcare Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.