Correlation Between Franchise Brands and Software Circle
Can any of the company-specific risk be diversified away by investing in both Franchise Brands 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 Franchise Brands and Software Circle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franchise Brands PLC and Software Circle plc, you can compare the effects of market volatilities on Franchise Brands 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 Franchise Brands with a short position of Software Circle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franchise Brands and Software Circle.
Diversification Opportunities for Franchise Brands and Software Circle
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Franchise and Software is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Franchise Brands PLC 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 Franchise Brands 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 Franchise Brands PLC 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 Franchise Brands i.e., Franchise Brands and Software Circle go up and down completely randomly.
Pair Corralation between Franchise Brands and Software Circle
Assuming the 90 days trading horizon Franchise Brands PLC is expected to under-perform the Software Circle. In addition to that, Franchise Brands is 2.33 times more volatile than Software Circle plc. It trades about -0.13 of its total potential returns per unit of risk. Software Circle plc is currently generating about 0.12 per unit of volatility. If you would invest 2,300 in Software Circle plc on November 6, 2024 and sell it today you would earn a total of 150.00 from holding Software Circle plc or generate 6.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franchise Brands PLC vs. Software Circle plc
Performance |
| Timeline |
| Franchise Brands PLC |
| Software Circle plc |
Franchise Brands and Software Circle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franchise Brands and Software Circle
The main advantage of trading using opposite Franchise Brands and Software Circle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franchise Brands 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.| Franchise Brands vs. Moneta Money Bank | Franchise Brands vs. Deutsche Pfandbriefbank AG | Franchise Brands vs. Zurich Insurance Group | Franchise Brands vs. UNIQA Insurance Group |
| Software Circle vs. Bytes Technology | Software Circle vs. Xeros Technology Group | Software Circle vs. Travel Leisure Co | Software Circle vs. Ecclesiastical Insurance Office |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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