Correlation Between Scottish Mortgage and Constellation Software

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Can any of the company-specific risk be diversified away by investing in both Scottish Mortgage 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 Scottish Mortgage and Constellation Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scottish Mortgage Investment and Constellation Software, you can compare the effects of market volatilities on Scottish Mortgage 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 Scottish Mortgage with a short position of Constellation Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scottish Mortgage and Constellation Software.

Diversification Opportunities for Scottish Mortgage and Constellation Software

ScottishConstellationDiversified AwayScottishConstellationDiversified Away100%
0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Scottish and Constellation is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Scottish Mortgage Investment and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Software and Scottish Mortgage 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 Scottish Mortgage Investment 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 Scottish Mortgage i.e., Scottish Mortgage and Constellation Software go up and down completely randomly.

Pair Corralation between Scottish Mortgage and Constellation Software

Assuming the 90 days trading horizon Scottish Mortgage Investment is expected to generate 0.91 times more return on investment than Constellation Software. However, Scottish Mortgage Investment is 1.09 times less risky than Constellation Software. It trades about 0.25 of its potential returns per unit of risk. Constellation Software is currently generating about 0.13 per unit of risk. If you would invest  1,101  in Scottish Mortgage Investment on November 19, 2024 and sell it today you would earn a total of  244.00  from holding Scottish Mortgage Investment or generate 22.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Scottish Mortgage Investment  vs.  Constellation Software

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 05101520
JavaScript chart by amCharts 3.21.151IZ1 W9C
       Timeline  
Scottish Mortgage 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Scottish Mortgage Investment are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Scottish Mortgage reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1111.51212.51313.5
Constellation Software 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Constellation Software may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2,9003,0003,1003,2003,300

Scottish Mortgage and Constellation Software Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.08-3.07-2.07-1.07-0.06791.052.183.314.435.56 0.050.100.150.20
JavaScript chart by amCharts 3.21.151IZ1 W9C
       Returns  

Pair Trading with Scottish Mortgage and Constellation Software

The main advantage of trading using opposite Scottish Mortgage and Constellation Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scottish Mortgage 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.
The idea behind Scottish Mortgage Investment and Constellation Software 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.
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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