Correlation Between Constellation Software and TFI International

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

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

Diversification Opportunities for Constellation Software and TFI International

-0.41

Correlation Coefficient

Constellation Software  TFI International

Very good diversification

The 3 months correlation between Constellation and TFI is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and TFI International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFI International 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 TFI International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFI International has no effect on the direction of Constellation Software i.e., Constellation Software and TFI International go up and down completely randomly.

Pair Corralation between Constellation Software and TFI International

Assuming the 90 days trading horizon Constellation Software is expected to generate 0.68 times more return on investment than TFI International. However, Constellation Software is 1.46 times less risky than TFI International. It trades about 0.12 of its potential returns per unit of risk. TFI International is currently generating about -0.01 per unit of risk. If you would invest  230,250  in Constellation Software on December 1, 2024 and sell it today you would earn a total of  268,447  from holding Constellation Software or generate 116.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Constellation Software  vs.  TFI International

Constellation Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 4 (%) 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.

TFI International

Risk-Adjusted Performance

Very Weak

Over the last 90 days TFI International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Constellation Software and TFI International

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

The idea behind Constellation Software and TFI International 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.