Correlation Between Constellation Software and Alamos Gold

Can any of the company-specific risk be diversified away by investing in both Constellation Software and Alamos Gold 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 Alamos Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Constellation Software and Alamos Gold, you can compare the effects of market volatilities on Constellation Software and Alamos Gold 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 Alamos Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Software and Alamos Gold.

Diversification Opportunities for Constellation Software and Alamos Gold

-0.2

Correlation Coefficient

Constellation Software  Alamos Gold

Good diversification

The 3 months correlation between Constellation and Alamos is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and Alamos Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamos Gold 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 Alamos Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamos Gold has no effect on the direction of Constellation Software i.e., Constellation Software and Alamos Gold go up and down completely randomly.

Pair Corralation between Constellation Software and Alamos Gold

Assuming the 90 days trading horizon Constellation Software is expected to generate 0.7 times more return on investment than Alamos Gold. However, Constellation Software is 1.42 times less risky than Alamos Gold. It trades about 0.27 of its potential returns per unit of risk. Alamos Gold is currently generating about -0.15 per unit of risk. If you would invest  426,321  in Constellation Software on September 4, 2024 and sell it today you would earn a total of  38,682  from holding Constellation Software or generate 9.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Constellation Software  vs.  Alamos Gold

Constellation Software

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Constellation Software may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alamos Gold

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alamos Gold are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal forward indicators, Alamos Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Constellation Software and Alamos Gold

The main advantage of trading using opposite Constellation Software and Alamos Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Software position performs unexpectedly, Alamos Gold 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 Alamos Gold will offset losses from the drop in Alamos Gold's long position.

The idea behind Constellation Software and Alamos Gold 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.