Correlation Between Constellation Software and ASM International

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

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

Diversification Opportunities for Constellation Software and ASM International

-0.52

Correlation Coefficient

Constellation Software  ASM International

Excellent diversification

The 3 months correlation between Constellation and ASM is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and ASM International NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASM International 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 ASM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASM International has no effect on the direction of Constellation Software i.e., Constellation Software and ASM International go up and down completely randomly.

Pair Corralation between Constellation Software and ASM International

Assuming the 90 days trading horizon Constellation Software is expected to generate 0.44 times more return on investment than ASM International. However, Constellation Software is 2.26 times less risky than ASM International. It trades about 0.13 of its potential returns per unit of risk. ASM International NV is currently generating about -0.03 per unit of risk. If you would invest  284,400  in Constellation Software on September 13, 2024 and sell it today you would earn a total of  27,100  from holding Constellation Software or generate 9.53% return on investment over 90 days.

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

Constellation Software  vs.  ASM International NV

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 comparatively uncertain fundamental indicators, Constellation Software may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ASM International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASM International NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ASM International 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 ASM International

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

The idea behind Constellation Software and ASM International NV 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.