Correlation Between Constellation Software and Propel Holdings

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

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

Diversification Opportunities for Constellation Software and Propel Holdings

0.51

Correlation Coefficient

Constellation Software  Propel Holdings

Very weak diversification

The 3 months correlation between Constellation and Propel is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and Propel Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Propel Holdings 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 Propel Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Propel Holdings has no effect on the direction of Constellation Software i.e., Constellation Software and Propel Holdings go up and down completely randomly.

Pair Corralation between Constellation Software and Propel Holdings

Assuming the 90 days trading horizon Constellation Software is expected to generate 6.5 times less return on investment than Propel Holdings. But when comparing it to its historical volatility, Constellation Software is 2.31 times less risky than Propel Holdings. It trades about 0.04 of its potential returns per unit of risk. Propel Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,050  in Propel Holdings on October 6, 2024 and sell it today you would earn a total of  640.00  from holding Propel Holdings or generate 20.98% return on investment over 90 days.

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

Constellation Software  vs.  Propel Holdings

Constellation Software

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 3 (%) 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.

Propel Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Propel Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Propel Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Constellation Software and Propel Holdings

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

The idea behind Constellation Software and Propel Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.