Correlation Between Constellation Software and IGM Financial
Can any of the company-specific risk be diversified away by investing in both Constellation Software and IGM Financial 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 IGM Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellation Software and IGM Financial, you can compare the effects of market volatilities on Constellation Software and IGM Financial 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 IGM Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Software and IGM Financial.
Diversification Opportunities for Constellation Software and IGM Financial
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Constellation and IGM is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and IGM Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM Financial 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 IGM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGM Financial has no effect on the direction of Constellation Software i.e., Constellation Software and IGM Financial go up and down completely randomly.
Pair Corralation between Constellation Software and IGM Financial
Assuming the 90 days trading horizon Constellation Software is expected to generate 5.43 times less return on investment than IGM Financial. In addition to that, Constellation Software is 1.41 times more volatile than IGM Financial. It trades about 0.03 of its total potential returns per unit of risk. IGM Financial is currently generating about 0.24 per unit of volatility. If you would invest 3,950 in IGM Financial on September 20, 2024 and sell it today you would earn a total of 602.00 from holding IGM Financial or generate 15.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Constellation Software vs. IGM Financial
Performance |
| Timeline |
| Constellation Software |
| IGM Financial |
Constellation Software and IGM Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellation Software and IGM Financial
The main advantage of trading using opposite Constellation Software and IGM Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Software position performs unexpectedly, IGM Financial 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 IGM Financial will offset losses from the drop in IGM Financial's long position.| Constellation Software vs. Kinaxis | Constellation Software vs. Open Text Corp | Constellation Software vs. Enghouse Systems | Constellation Software vs. CGI Inc |
| IGM Financial vs. Berkshire Hathaway CDR | IGM Financial vs. E L Financial Corp | IGM Financial vs. E L Financial 3 | IGM Financial vs. Molson Coors Canada |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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