Correlation Between Software Circle and Xeros Technology

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

Diversification Opportunities for Software Circle and Xeros Technology

0.61

Correlation Coefficient

Software Circle  Xeros Technology

Poor diversification

The 3 months correlation between Software and Xeros is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Software Circle plc and Xeros Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xeros Technology 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 Xeros Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xeros Technology has no effect on the direction of Software Circle i.e., Software Circle and Xeros Technology go up and down completely randomly.

Pair Corralation between Software Circle and Xeros Technology

Assuming the 90 days trading horizon Software Circle is expected to generate 11.24 times less return on investment than Xeros Technology. But when comparing it to its historical volatility, Software Circle plc is 1.86 times less risky than Xeros Technology. It trades about 0.02 of its potential returns per unit of risk. Xeros Technology Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  110.00  in Xeros Technology Group on April 24, 2025 and sell it today you would earn a total of  40.00  from holding Xeros Technology Group or generate 36.36% return on investment over 90 days.

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

Software Circle plc  vs.  Xeros Technology 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 1 (%) 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.

Xeros Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xeros Technology Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Xeros Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Software Circle and Xeros Technology

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

The idea behind Software Circle plc and Xeros Technology 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.