Correlation Between Maple Leaf and Constellation Software
Can any of the company-specific risk be diversified away by investing in both Maple Leaf 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 Maple Leaf and Constellation Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Maple Leaf Foods and Constellation Software, you can compare the effects of market volatilities on Maple Leaf 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 Maple Leaf with a short position of Constellation Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maple Leaf and Constellation Software.
Diversification Opportunities for Maple Leaf and Constellation Software
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Maple and Constellation is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Software and Maple Leaf 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 Maple Leaf Foods 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 Maple Leaf i.e., Maple Leaf and Constellation Software go up and down completely randomly.
Pair Corralation between Maple Leaf and Constellation Software
Assuming the 90 days trading horizon Maple Leaf Foods is expected to under-perform the Constellation Software. In addition to that, Maple Leaf is 1.22 times more volatile than Constellation Software. It trades about -0.06 of its total potential returns per unit of risk. Constellation Software is currently generating about 0.1 per unit of volatility. If you would invest 403,625 in Constellation Software on November 1, 2024 and sell it today you would earn a total of 68,875 from holding Constellation Software or generate 17.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Maple Leaf Foods vs. Constellation Software
Performance |
| Timeline |
| Maple Leaf Foods |
| Constellation Software |
Maple Leaf and Constellation Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maple Leaf and Constellation Software
The main advantage of trading using opposite Maple Leaf and Constellation Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maple Leaf 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.| Maple Leaf vs. Saputo Inc | Maple Leaf vs. George Weston Limited | Maple Leaf vs. Empire Company Limited | Maple Leaf vs. Premium Brands Holdings |
| Constellation Software vs. Kinaxis | Constellation Software vs. Open Text Corp | Constellation Software vs. Enghouse Systems | Constellation Software vs. CGI Inc |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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