Correlation Between Constellation Software and Benchmark Electronics

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Constellation Software and Benchmark Electronics 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 Benchmark Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellation Software and Benchmark Electronics, you can compare the effects of market volatilities on Constellation Software and Benchmark Electronics 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 Benchmark Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Software and Benchmark Electronics.

Diversification Opportunities for Constellation Software and Benchmark Electronics

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Constellation and Benchmark is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and Benchmark Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Electronics 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 Benchmark Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Electronics has no effect on the direction of Constellation Software i.e., Constellation Software and Benchmark Electronics go up and down completely randomly.

Pair Corralation between Constellation Software and Benchmark Electronics

Assuming the 90 days trading horizon Constellation Software is expected to generate 2.2 times less return on investment than Benchmark Electronics. But when comparing it to its historical volatility, Constellation Software is 1.91 times less risky than Benchmark Electronics. It trades about 0.08 of its potential returns per unit of risk. Benchmark Electronics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,457  in Benchmark Electronics on October 16, 2024 and sell it today you would earn a total of  2,003  from holding Benchmark Electronics or generate 81.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.63%
ValuesDaily Returns

Constellation Software  vs.  Benchmark Electronics

 Performance 
       Timeline  
Constellation Software 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Constellation Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Constellation Software is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Benchmark Electronics 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Benchmark Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Constellation Software and Benchmark Electronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Constellation Software and Benchmark Electronics

The main advantage of trading using opposite Constellation Software and Benchmark Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Software position performs unexpectedly, Benchmark Electronics 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 Benchmark Electronics will offset losses from the drop in Benchmark Electronics' long position.
The idea behind Constellation Software and Benchmark Electronics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

Other Complementary Tools

My Watchlist Analysis
Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like
Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
Stock Tickers
Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites
Odds Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Crypto Correlations
Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins