Correlation Between Pets At and Software Circle

Can any of the company-specific risk be diversified away by investing in both Pets At 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 Pets At and Software Circle into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pets at Home and Software Circle plc, you can compare the effects of market volatilities on Pets At 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 Pets At with a short position of Software Circle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pets At and Software Circle.

Diversification Opportunities for Pets At and Software Circle

0.65

Correlation Coefficient

Pets At  Software Circle

Poor diversification

The 3 months correlation between Pets and Software is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Pets at Home 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 Pets At 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 Pets at Home 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 Pets At i.e., Pets At and Software Circle go up and down completely randomly.

Pair Corralation between Pets At and Software Circle

Assuming the 90 days trading horizon Pets at Home is expected to under-perform the Software Circle. But the stock apears to be less risky and, when comparing its historical volatility, Pets at Home is 1.12 times less risky than Software Circle. The stock trades about -0.06 of its potential returns per unit of risk. The Software Circle plc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,950  in Software Circle plc on May 21, 2025 and sell it today you would lose (100.00) from holding Software Circle plc or give up 3.39% of portfolio value over 90 days.

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

Pets at Home  vs.  Software Circle plc

Pets at Home

Risk-Adjusted Performance

Weakest

Over the last 90 days Pets at Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pets At is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Software Circle plc

Risk-Adjusted Performance

Weakest

Over the last 90 days Software Circle plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Software Circle is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pets At and Software Circle

The main advantage of trading using opposite Pets At and Software Circle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pets At 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.

The idea behind Pets at Home and Software Circle plc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.