Correlation Between Constellation Software and Canso Select

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

By analyzing existing cross correlation between Constellation Software and Canso Select Opportunities, you can compare the effects of market volatilities on Constellation Software and Canso Select 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 Constellation Software with a short position of Canso Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Software and Canso Select.

Diversification Opportunities for Constellation Software and Canso Select

0.42

Correlation Coefficient

Constellation Software  Canso Select

Very weak diversification

The 3 months correlation between Constellation and Canso is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and Canso Select Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canso Select Opportu and Constellation Software 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 Constellation Software are associated (or correlated) with Canso Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canso Select Opportu has no effect on the direction of Constellation Software i.e., Constellation Software and Canso Select go up and down completely randomly.

Pair Corralation between Constellation Software and Canso Select

Assuming the 90 days trading horizon Constellation Software is expected to generate 0.46 times more return on investment than Canso Select. However, Constellation Software is 2.19 times less risky than Canso Select. It trades about 0.12 of its potential returns per unit of risk. Canso Select Opportunities is currently generating about 0.02 per unit of risk. If you would invest  208,541  in Constellation Software on September 19, 2024 and sell it today you would earn a total of  238,171  from holding Constellation Software or generate 114.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Constellation Software  vs.  Canso Select Opportunities

Constellation Software

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Constellation Software is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Canso Select Opportu

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canso Select Opportunities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Canso Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Constellation Software and Canso Select

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

The idea behind Constellation Software and Canso Select Opportunities 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 Transaction History module to view history of all your transactions and understand their impact on performance.