Correlation Between Future Metals and Software Circle
Can any of the company-specific risk be diversified away by investing in both Future Metals 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 Future Metals and Software Circle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Future Metals NL and Software Circle plc, you can compare the effects of market volatilities on Future Metals 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 Future Metals with a short position of Software Circle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Future Metals and Software Circle.
Diversification Opportunities for Future Metals and Software Circle
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Future and Software is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Future Metals NL 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 Future Metals 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 Future Metals NL 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 Future Metals i.e., Future Metals and Software Circle go up and down completely randomly.
Pair Corralation between Future Metals and Software Circle
Assuming the 90 days trading horizon Future Metals NL is expected to under-perform the Software Circle. In addition to that, Future Metals is 7.42 times more volatile than Software Circle plc. It trades about -0.45 of its total potential returns per unit of risk. Software Circle plc is currently generating about 0.28 per unit of volatility. If you would invest 2,300 in Software Circle plc on October 11, 2024 and sell it today you would earn a total of 50.00 from holding Software Circle plc or generate 2.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Future Metals NL vs. Software Circle plc
Performance |
| Timeline |
| Future Metals NL |
| Software Circle plc |
Future Metals and Software Circle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Future Metals and Software Circle
The main advantage of trading using opposite Future Metals and Software Circle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Future Metals 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.| Future Metals vs. Eastman Chemical Co | Future Metals vs. Vitec Software Group | Future Metals vs. Alien Metals | Future Metals vs. Air Products Chemicals |
| Software Circle vs. Europa Metals | Software Circle vs. First Class Metals | Software Circle vs. European Metals Holdings | Software Circle vs. Jacquet Metal Service |
Check out your portfolio center.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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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