Correlation Between Software Circle and Restore Plc

Can any of the company-specific risk be diversified away by investing in both Software Circle and Restore Plc 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 Restore Plc 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 Restore plc, you can compare the effects of market volatilities on Software Circle and Restore Plc 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 Restore Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Software Circle and Restore Plc.

Diversification Opportunities for Software Circle and Restore Plc

-0.34

Correlation Coefficient

Software Circle  Restore Plc

Very good diversification

The 3 months correlation between Software and Restore is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Software Circle plc and Restore plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Restore plc 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 Restore Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Restore plc has no effect on the direction of Software Circle i.e., Software Circle and Restore Plc go up and down completely randomly.

Pair Corralation between Software Circle and Restore Plc

Assuming the 90 days trading horizon Software Circle plc is expected to under-perform the Restore Plc. But the stock apears to be less risky and, when comparing its historical volatility, Software Circle plc is 1.18 times less risky than Restore Plc. The stock trades about -0.05 of its potential returns per unit of risk. The Restore plc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  24,338  in Restore plc on May 15, 2025 and sell it today you would earn a total of  2,312  from holding Restore plc or generate 9.5% return on investment over 90 days.

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

Software Circle plc  vs.  Restore plc

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Restore plc

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Restore plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Restore Plc may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Software Circle and Restore Plc

The main advantage of trading using opposite Software Circle and Restore Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Software Circle position performs unexpectedly, Restore Plc 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 Restore Plc will offset losses from the drop in Restore Plc's long position.

The idea behind Software Circle plc and Restore 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 Valuation module to check real value of public entities based on technical and fundamental data.