Correlation Between Constellation Software and Western Copper

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

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

Diversification Opportunities for Constellation Software and Western Copper

-0.14

Correlation Coefficient

Constellation Software  Western Copper

Good diversification

The 3 months correlation between Constellation and Western is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Constellation Software i.e., Constellation Software and Western Copper go up and down completely randomly.

Pair Corralation between Constellation Software and Western Copper

Assuming the 90 days trading horizon Constellation Software is expected to generate 0.43 times more return on investment than Western Copper. However, Constellation Software is 2.32 times less risky than Western Copper. It trades about 0.06 of its potential returns per unit of risk. Western Copper and is currently generating about 0.0 per unit of risk. If you would invest  235,654  in Constellation Software on October 9, 2024 and sell it today you would earn a total of  49,846  from holding Constellation Software or generate 21.15% return on investment over 90 days.

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

Constellation Software  vs.  Western Copper and

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 comparatively stable fundamental indicators, Constellation Software is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Western Copper is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Constellation Software and Western Copper

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

The idea behind Constellation Software and Western Copper and 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.