Correlation Between XLMedia PLC and Software Circle
Can any of the company-specific risk be diversified away by investing in both XLMedia PLC 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 XLMedia PLC and Software Circle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XLMedia PLC and Software Circle plc, you can compare the effects of market volatilities on XLMedia PLC 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 XLMedia PLC with a short position of Software Circle. Check out your portfolio center. Please also check ongoing floating volatility patterns of XLMedia PLC and Software Circle.
Diversification Opportunities for XLMedia PLC and Software Circle
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between XLMedia and Software is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding XLMedia 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 XLMedia PLC 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 XLMedia 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 XLMedia PLC i.e., XLMedia PLC and Software Circle go up and down completely randomly.
Pair Corralation between XLMedia PLC and Software Circle
Assuming the 90 days trading horizon XLMedia PLC is expected to generate 3.78 times more return on investment than Software Circle. However, XLMedia PLC is 3.78 times more volatile than Software Circle plc. It trades about 0.04 of its potential returns per unit of risk. Software Circle plc is currently generating about 0.13 per unit of risk. If you would invest 660.00 in XLMedia PLC on October 16, 2024 and sell it today you would earn a total of 280.00 from holding XLMedia PLC or generate 42.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
XLMedia PLC vs. Software Circle plc
Performance |
| Timeline |
| XLMedia PLC |
| Software Circle plc |
XLMedia PLC and Software Circle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XLMedia PLC and Software Circle
The main advantage of trading using opposite XLMedia PLC and Software Circle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XLMedia PLC 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.| XLMedia PLC vs. Bell Food Group | XLMedia PLC vs. Axfood AB | XLMedia PLC vs. Leroy Seafood Group | XLMedia PLC vs. GlobalData PLC |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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