Correlation Between Software Circle and Beazer Homes
Can any of the company-specific risk be diversified away by investing in both Software Circle and Beazer Homes 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 Beazer Homes 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 Beazer Homes USA, you can compare the effects of market volatilities on Software Circle and Beazer Homes 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 Beazer Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Software Circle and Beazer Homes.
Diversification Opportunities for Software Circle and Beazer Homes
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Software and Beazer is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Software Circle plc and Beazer Homes USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beazer Homes USA 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 Beazer Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beazer Homes USA has no effect on the direction of Software Circle i.e., Software Circle and Beazer Homes go up and down completely randomly.
Pair Corralation between Software Circle and Beazer Homes
Assuming the 90 days trading horizon Software Circle plc is expected to generate 0.2 times more return on investment than Beazer Homes. However, Software Circle plc is 4.99 times less risky than Beazer Homes. It trades about 0.19 of its potential returns per unit of risk. Beazer Homes USA is currently generating about -0.15 per unit of risk. If you would invest 2,350 in Software Circle plc on November 7, 2024 and sell it today you would earn a total of 100.00 from holding Software Circle plc or generate 4.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 76.19% |
| Values | Daily Returns |
Software Circle plc vs. Beazer Homes USA
Performance |
| Timeline |
| Software Circle plc |
| Beazer Homes USA |
Software Circle and Beazer Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Software Circle and Beazer Homes
The main advantage of trading using opposite Software Circle and Beazer Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Software Circle position performs unexpectedly, Beazer Homes 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 Beazer Homes will offset losses from the drop in Beazer Homes' long position.| Software Circle vs. First Class Metals | Software Circle vs. AMG Advanced Metallurgical | Software Circle vs. Compal Electronics GDR | Software Circle vs. Central Asia Metals |
| Beazer Homes vs. BE Semiconductor Industries | Beazer Homes vs. Take Two Interactive Software | Beazer Homes vs. McEwen Mining | Beazer Homes vs. Clean Power Hydrogen |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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