Correlation Between Constellation Software and Prosafe SE

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

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

Diversification Opportunities for Constellation Software and Prosafe SE

-0.87

Correlation Coefficient

Constellation Software  Prosafe SE

Pay attention - limited upside

The 3 months correlation between Constellation and Prosafe is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and Prosafe SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosafe SE 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 Prosafe SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosafe SE has no effect on the direction of Constellation Software i.e., Constellation Software and Prosafe SE go up and down completely randomly.

Pair Corralation between Constellation Software and Prosafe SE

Assuming the 90 days trading horizon Constellation Software is expected to generate 0.23 times more return on investment than Prosafe SE. However, Constellation Software is 4.28 times less risky than Prosafe SE. It trades about 0.1 of its potential returns per unit of risk. Prosafe SE is currently generating about -0.13 per unit of risk. If you would invest  220,749  in Constellation Software on September 20, 2024 and sell it today you would earn a total of  87,751  from holding Constellation Software or generate 39.75% return on investment over 90 days.

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

Constellation Software  vs.  Prosafe SE

Constellation Software

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Constellation Software may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Prosafe SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosafe SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Constellation Software and Prosafe SE

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

The idea behind Constellation Software and Prosafe SE 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.