Correlation Between Constellation Software and Rochester Resources

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

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

Diversification Opportunities for Constellation Software and Rochester Resources

0.1

Correlation Coefficient

Constellation Software  Rochester Resources

Average diversification

The 3 months correlation between Constellation and Rochester is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and Rochester Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rochester Resources 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 Rochester Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rochester Resources has no effect on the direction of Constellation Software i.e., Constellation Software and Rochester Resources go up and down completely randomly.

Pair Corralation between Constellation Software and Rochester Resources

Assuming the 90 days trading horizon Constellation Software is expected to generate 50.71 times less return on investment than Rochester Resources. But when comparing it to its historical volatility, Constellation Software is 16.07 times less risky than Rochester Resources. It trades about 0.04 of its potential returns per unit of risk. Rochester Resources is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Rochester Resources on December 4, 2024 and sell it today you would earn a total of  0.50  from holding Rochester Resources or generate 25.0% return on investment over 90 days.

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

Constellation Software  vs.  Rochester Resources

Constellation Software

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 2 (%) 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.

Rochester Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rochester Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Rochester Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Constellation Software and Rochester Resources

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

The idea behind Constellation Software and Rochester Resources 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.