Correlation Between Constellation Software and Millbank Mining

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

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

Diversification Opportunities for Constellation Software and Millbank Mining

-0.03

Correlation Coefficient

Constellation Software  Millbank Mining

Good diversification

The 3 months correlation between Constellation and Millbank is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and Millbank Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Millbank Mining Corp 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 Millbank Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Millbank Mining Corp has no effect on the direction of Constellation Software i.e., Constellation Software and Millbank Mining go up and down completely randomly.

Pair Corralation between Constellation Software and Millbank Mining

Assuming the 90 days trading horizon Constellation Software is expected to generate 0.44 times more return on investment than Millbank Mining. However, Constellation Software is 2.27 times less risky than Millbank Mining. It trades about -0.13 of its potential returns per unit of risk. Millbank Mining Corp is currently generating about -0.07 per unit of risk. If you would invest  464,455  in Constellation Software on September 22, 2024 and sell it today you would lose (19,199) from holding Constellation Software or give up 4.13% of portfolio value over 90 days.

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

Constellation Software  vs.  Millbank Mining Corp

Constellation Software

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Constellation Software is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Millbank Mining Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Millbank Mining Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Millbank Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Constellation Software and Millbank Mining

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

The idea behind Constellation Software and Millbank Mining Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.