Correlation Between Constellation Software and Lumine
Can any of the company-specific risk be diversified away by investing in both Constellation Software and Lumine 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 Lumine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellation Software and Lumine Group, you can compare the effects of market volatilities on Constellation Software and Lumine 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 Lumine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Software and Lumine.
Diversification Opportunities for Constellation Software and Lumine
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Constellation and Lumine is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and Lumine Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumine Group 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 Lumine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumine Group has no effect on the direction of Constellation Software i.e., Constellation Software and Lumine go up and down completely randomly.
Pair Corralation between Constellation Software and Lumine
Assuming the 90 days trading horizon Constellation Software is expected to generate 1.71 times less return on investment than Lumine. But when comparing it to its historical volatility, Constellation Software is 1.55 times less risky than Lumine. It trades about 0.11 of its potential returns per unit of risk. Lumine Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,170 in Lumine Group on September 13, 2024 and sell it today you would earn a total of 240.00 from holding Lumine Group or generate 5.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Constellation Software vs. Lumine Group
Performance |
| Timeline |
| Constellation Software |
| Lumine Group |
Constellation Software and Lumine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellation Software and Lumine
The main advantage of trading using opposite Constellation Software and Lumine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Software position performs unexpectedly, Lumine 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 Lumine will offset losses from the drop in Lumine's long position.| Constellation Software vs. Adcore Inc | Constellation Software vs. Emerge Commerce | Constellation Software vs. Quisitive Technology Solutions | Constellation Software vs. DGTL Holdings |
| Lumine vs. Adcore Inc | Lumine vs. Emerge Commerce | Lumine vs. Quisitive Technology Solutions | Lumine vs. DGTL Holdings |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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