Correlation Between Constellation Software and INTER CARS
Can any of the company-specific risk be diversified away by investing in both Constellation Software and INTER CARS 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 INTER CARS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellation Software and INTER CARS SA, you can compare the effects of market volatilities on Constellation Software and INTER CARS 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 INTER CARS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Software and INTER CARS.
Diversification Opportunities for Constellation Software and INTER CARS
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Constellation and INTER is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and INTER CARS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTER CARS SA 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 INTER CARS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTER CARS SA has no effect on the direction of Constellation Software i.e., Constellation Software and INTER CARS go up and down completely randomly.
Pair Corralation between Constellation Software and INTER CARS
Assuming the 90 days trading horizon Constellation Software is expected to generate 0.67 times more return on investment than INTER CARS. However, Constellation Software is 1.48 times less risky than INTER CARS. It trades about 0.11 of its potential returns per unit of risk. INTER CARS SA is currently generating about -0.02 per unit of risk. If you would invest 213,164 in Constellation Software on August 24, 2024 and sell it today you would earn a total of 93,336 from holding Constellation Software or generate 43.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Constellation Software vs. INTER CARS SA
Performance |
| Timeline |
| Constellation Software |
| INTER CARS SA |
Constellation Software and INTER CARS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellation Software and INTER CARS
The main advantage of trading using opposite Constellation Software and INTER CARS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Software position performs unexpectedly, INTER CARS 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 INTER CARS will offset losses from the drop in INTER CARS's long position.| Constellation Software vs. Apple Inc | Constellation Software vs. Apple Inc | Constellation Software vs. Apple Inc | Constellation Software vs. Apple Inc |
| INTER CARS vs. INTERSHOP Communications Aktiengesellschaft | INTER CARS vs. Lion Biotechnologies | INTER CARS vs. British American Tobacco | INTER CARS vs. Chunghwa Telecom Co |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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