Correlation Between Constellation Software and Apple

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

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

Diversification Opportunities for Constellation Software and Apple

0.57

Correlation Coefficient

Constellation Software  Apple

Very weak diversification

The 3 months correlation between Constellation and Apple is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Constellation Software i.e., Constellation Software and Apple go up and down completely randomly.

Pair Corralation between Constellation Software and Apple

Assuming the 90 days trading horizon Constellation Software is expected to generate 1.06 times less return on investment than Apple. But when comparing it to its historical volatility, Constellation Software is 1.11 times less risky than Apple. It trades about 0.1 of its potential returns per unit of risk. Apple Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  12,307  in Apple Inc on October 11, 2024 and sell it today you would earn a total of  11,183  from holding Apple Inc or generate 90.87% return on investment over 90 days.

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

Constellation Software  vs.  Apple Inc

Constellation Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellation Software has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Apple Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Constellation Software and Apple

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

The idea behind Constellation Software and Apple Inc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.