Correlation Between PT Bank and Constellation Software

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

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

Diversification Opportunities for PT Bank and Constellation Software

-0.37

Correlation Coefficient

PT Bank  Constellation Software

Very good diversification

The 3 months correlation between PQ9 and Constellation is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Software and PT Bank 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 PT Bank Mandiri 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 PT Bank i.e., PT Bank and Constellation Software go up and down completely randomly.

Pair Corralation between PT Bank and Constellation Software

Assuming the 90 days horizon PT Bank Mandiri is expected to under-perform the Constellation Software. In addition to that, PT Bank is 4.32 times more volatile than Constellation Software. It trades about -0.14 of its total potential returns per unit of risk. Constellation Software is currently generating about -0.26 per unit of volatility. If you would invest  316,393  in Constellation Software on October 9, 2024 and sell it today you would lose (15,893) from holding Constellation Software or give up 5.02% of portfolio value over 90 days.

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

PT Bank Mandiri  vs.  Constellation Software

PT Bank Mandiri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Mandiri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Constellation Software

Risk-Adjusted Performance

4 of 100

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 rather sound fundamental indicators, Constellation Software is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PT Bank and Constellation Software

The main advantage of trading using opposite PT Bank and Constellation Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank 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 PT Bank Mandiri 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.