Correlation Between Constellation Software and Leons Furniture
Can any of the company-specific risk be diversified away by investing in both Constellation Software and Leons Furniture 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 Leons Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellation Software and Leons Furniture Limited, you can compare the effects of market volatilities on Constellation Software and Leons Furniture 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 Leons Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Software and Leons Furniture.
Diversification Opportunities for Constellation Software and Leons Furniture
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Constellation and Leons is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture 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 Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of Constellation Software i.e., Constellation Software and Leons Furniture go up and down completely randomly.
Pair Corralation between Constellation Software and Leons Furniture
Assuming the 90 days trading horizon Constellation Software is expected to generate 1.2 times more return on investment than Leons Furniture. However, Constellation Software is 1.2 times more volatile than Leons Furniture Limited. It trades about 0.26 of its potential returns per unit of risk. Leons Furniture Limited is currently generating about -0.15 per unit of risk. If you would invest 430,475 in Constellation Software on August 29, 2024 and sell it today you would earn a total of 37,426 from holding Constellation Software or generate 8.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Constellation Software vs. Leons Furniture Limited
Performance |
| Timeline |
| Constellation Software |
| Leons Furniture |
Constellation Software and Leons Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellation Software and Leons Furniture
The main advantage of trading using opposite Constellation Software and Leons Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Software position performs unexpectedly, Leons Furniture 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 Leons Furniture will offset losses from the drop in Leons Furniture's long position.| Constellation Software vs. Kinaxis | Constellation Software vs. Open Text Corp | Constellation Software vs. Enghouse Systems | Constellation Software vs. CGI Inc |
| Leons Furniture vs. Telus Corp | Leons Furniture vs. Toronto Dominion Bank | Leons Furniture vs. Manulife Financial Corp | Leons Furniture vs. Canadian Natural Resources |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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