Correlation Between Constellation Software and Excellon Resources

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

By analyzing existing cross correlation between Constellation Software and Excellon Resources, you can compare the effects of market volatilities on Constellation Software and Excellon Resources 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 Excellon Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Software and Excellon Resources.

Diversification Opportunities for Constellation Software and Excellon Resources

-0.35

Correlation Coefficient

Constellation Software  Excellon Resources

Very good diversification

The 3 months correlation between Constellation and Excellon is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and Excellon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excellon Resources 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 Excellon Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excellon Resources has no effect on the direction of Constellation Software i.e., Constellation Software and Excellon Resources go up and down completely randomly.

Pair Corralation between Constellation Software and Excellon Resources

Assuming the 90 days trading horizon Constellation Software is expected to generate 1.08 times less return on investment than Excellon Resources. But when comparing it to its historical volatility, Constellation Software is 4.79 times less risky than Excellon Resources. It trades about 0.08 of its potential returns per unit of risk. Excellon Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Excellon Resources on September 14, 2024 and sell it today you would lose (0.50) from holding Excellon Resources or give up 5.0% of portfolio value over 90 days.

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

Constellation Software  vs.  Excellon Resources

Constellation Software

Risk-Adjusted Performance

6 of 100

OK

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 unfluctuating basic indicators, Constellation Software may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Excellon Resources

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Excellon Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Excellon Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Constellation Software and Excellon Resources

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

The idea behind Constellation Software and Excellon Resources 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.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.