Correlation Between Software Circle and SBM Offshore

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

Diversification Opportunities for Software Circle and SBM Offshore

0.58

Correlation Coefficient

Software Circle  SBM Offshore

Very weak diversification

The 3 months correlation between Software and SBM is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Software Circle plc and SBM Offshore NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM Offshore NV 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 SBM Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM Offshore NV has no effect on the direction of Software Circle i.e., Software Circle and SBM Offshore go up and down completely randomly.

Pair Corralation between Software Circle and SBM Offshore

Assuming the 90 days trading horizon Software Circle is expected to generate 6.3 times less return on investment than SBM Offshore. In addition to that, Software Circle is 1.67 times more volatile than SBM Offshore NV. It trades about 0.04 of its total potential returns per unit of risk. SBM Offshore NV is currently generating about 0.38 per unit of volatility. If you would invest  1,711  in SBM Offshore NV on April 22, 2025 and sell it today you would earn a total of  592.00  from holding SBM Offshore NV or generate 34.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Software Circle plc  vs.  SBM Offshore NV

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

SBM Offshore NV

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, SBM Offshore disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Software Circle and SBM Offshore

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

The idea behind Software Circle plc and SBM Offshore NV 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..