Correlation Between Rogers Communications and Constellation Software

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

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

Diversification Opportunities for Rogers Communications and Constellation Software

-0.34

Correlation Coefficient

Rogers Communications  Constellation Software

Very good diversification

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

Pair Corralation between Rogers Communications and Constellation Software

Assuming the 90 days trading horizon Rogers Communications is expected to under-perform the Constellation Software. In addition to that, Rogers Communications is 1.07 times more volatile than Constellation Software. It trades about -0.03 of its total potential returns per unit of risk. Constellation Software is currently generating about 0.14 per unit of volatility. If you would invest  425,643  in Constellation Software on September 3, 2024 and sell it today you would earn a total of  47,773  from holding Constellation Software or generate 11.22% return on investment over 90 days.

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

Rogers Communications  vs.  Constellation Software

Rogers Communications

Risk-Adjusted Performance

0 of 100

Very Weak

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

Constellation Software

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 10 (%) 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.

Pair Trading with Rogers Communications and Constellation Software

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

The idea behind Rogers Communications and Constellation Software 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.