Correlation Between Constellation Software and Kilroy Realty

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

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

Diversification Opportunities for Constellation Software and Kilroy Realty

0.63

Correlation Coefficient

Constellation Software  Kilroy Realty

Poor diversification

The 3 months correlation between Constellation and Kilroy is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and Kilroy Realty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kilroy Realty Corp 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 Kilroy Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kilroy Realty Corp has no effect on the direction of Constellation Software i.e., Constellation Software and Kilroy Realty go up and down completely randomly.

Pair Corralation between Constellation Software and Kilroy Realty

Assuming the 90 days trading horizon Constellation Software is expected to generate 2.1 times less return on investment than Kilroy Realty. But when comparing it to its historical volatility, Constellation Software is 1.75 times less risky than Kilroy Realty. It trades about 0.15 of its potential returns per unit of risk. Kilroy Realty Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,091  in Kilroy Realty Corp on September 12, 2024 and sell it today you would earn a total of  749.00  from holding Kilroy Realty Corp or generate 24.23% return on investment over 90 days.

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

Constellation Software  vs.  Kilroy Realty Corp

Constellation Software

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Constellation Software may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kilroy Realty Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kilroy Realty Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kilroy Realty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Constellation Software and Kilroy Realty

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

The idea behind Constellation Software and Kilroy Realty Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.