Correlation Between First National and Constellation Software
Can any of the company-specific risk be diversified away by investing in both First National 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 First National and Constellation Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First National Financial and Constellation Software, you can compare the effects of market volatilities on First National 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 First National with a short position of Constellation Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of First National and Constellation Software.
Diversification Opportunities for First National and Constellation Software
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Constellation is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Software and First National 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 First National Financial 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 First National i.e., First National and Constellation Software go up and down completely randomly.
Pair Corralation between First National and Constellation Software
Assuming the 90 days trading horizon First National is expected to generate 2.67 times less return on investment than Constellation Software. But when comparing it to its historical volatility, First National Financial is 1.4 times less risky than Constellation Software. It trades about 0.07 of its potential returns per unit of risk. Constellation Software is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 206,557 in Constellation Software on September 14, 2024 and sell it today you would earn a total of 258,448 from holding Constellation Software or generate 125.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First National Financial vs. Constellation Software
Performance |
| Timeline |
| First National Financial |
| Constellation Software |
First National and Constellation Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First National and Constellation Software
The main advantage of trading using opposite First National and Constellation Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National 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.| First National vs. Economic Investment Trust | First National vs. Stampede Drilling | First National vs. Altair Resources | First National vs. Pembina Pipeline Corp |
| Constellation Software vs. Adcore Inc | Constellation Software vs. Emerge Commerce | Constellation Software vs. Quisitive Technology Solutions | Constellation Software 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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