Correlation Between East Side and Constellation Software

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

By analyzing existing cross correlation between East Side Games and Constellation Software, you can compare the effects of market volatilities on East Side and Constellation Software 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 East Side with a short position of Constellation Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Side and Constellation Software.

Diversification Opportunities for East Side and Constellation Software

-0.82

Correlation Coefficient

East Side  Constellation Software

Pay attention - limited upside

The 3 months correlation between East and Constellation is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding East Side Games and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Software and East Side 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 East Side Games are associated (or correlated) with Constellation Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Software has no effect on the direction of East Side i.e., East Side and Constellation Software go up and down completely randomly.

Pair Corralation between East Side and Constellation Software

Assuming the 90 days trading horizon East Side Games is expected to under-perform the Constellation Software. In addition to that, East Side is 2.58 times more volatile than Constellation Software. It trades about -0.07 of its total potential returns per unit of risk. Constellation Software is currently generating about 0.13 per unit of volatility. If you would invest  418,016  in Constellation Software on September 5, 2024 and sell it today you would earn a total of  46,987  from holding Constellation Software or generate 11.24% return on investment over 90 days.

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

East Side Games  vs.  Constellation Software

East Side Games

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Side Games 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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Constellation Software

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 10 (%) 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.

Pair Trading with East Side and Constellation Software

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

The idea behind East Side Games and Constellation Software 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.