Correlation Between Software Circle and Axway Software

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

Diversification Opportunities for Software Circle and Axway Software

0.63

Correlation Coefficient

Software Circle  Axway Software

Poor diversification

The 3 months correlation between Software and Axway is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Software Circle plc and Axway Software SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axway Software SA 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 Axway Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axway Software SA has no effect on the direction of Software Circle i.e., Software Circle and Axway Software go up and down completely randomly.

Pair Corralation between Software Circle and Axway Software

Assuming the 90 days trading horizon Software Circle is expected to generate 6.35 times less return on investment than Axway Software. But when comparing it to its historical volatility, Software Circle plc is 1.15 times less risky than Axway Software. It trades about 0.04 of its potential returns per unit of risk. Axway Software SA is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,000  in Axway Software SA on April 21, 2025 and sell it today you would earn a total of  1,050  from holding Axway Software SA or generate 35.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Software Circle plc  vs.  Axway Software SA

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.

Axway Software SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Axway Software SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Axway Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Software Circle and Axway Software

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

The idea behind Software Circle plc and Axway Software SA 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.