Correlation Between Software Circle and CATLIN GROUP

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

Diversification Opportunities for Software Circle and CATLIN GROUP

0.2

Correlation Coefficient

Software Circle  CATLIN GROUP

Modest diversification

The 3 months correlation between Software and CATLIN is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Software Circle plc and CATLIN GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CATLIN GROUP 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 CATLIN GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CATLIN GROUP has no effect on the direction of Software Circle i.e., Software Circle and CATLIN GROUP go up and down completely randomly.

Pair Corralation between Software Circle and CATLIN GROUP

Assuming the 90 days trading horizon Software Circle plc is expected to generate 2.79 times more return on investment than CATLIN GROUP. However, Software Circle is 2.79 times more volatile than CATLIN GROUP . It trades about 0.04 of its potential returns per unit of risk. CATLIN GROUP is currently generating about -0.06 per unit of risk. If you would invest  2,800  in Software Circle plc on April 20, 2025 and sell it today you would earn a total of  100.00  from holding Software Circle plc or generate 3.57% return on investment over 90 days.

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

Software Circle plc  vs.  CATLIN GROUP

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.

CATLIN GROUP

Risk-Adjusted Performance

Very Weak

Over the last 90 days CATLIN GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CATLIN GROUP is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Software Circle and CATLIN GROUP

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

The idea behind Software Circle plc and CATLIN GROUP 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.