Correlation Between Constellation Software and CDN IMPERIAL

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

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

Diversification Opportunities for Constellation Software and CDN IMPERIAL

-0.53

Correlation Coefficient

Constellation Software  CDN IMPERIAL

Excellent diversification

The 3 months correlation between Constellation and CDN is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and CDN IMPERIAL BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDN IMPERIAL BANK 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 CDN IMPERIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDN IMPERIAL BANK has no effect on the direction of Constellation Software i.e., Constellation Software and CDN IMPERIAL go up and down completely randomly.

Pair Corralation between Constellation Software and CDN IMPERIAL

Assuming the 90 days trading horizon Constellation Software is expected to generate 1.08 times more return on investment than CDN IMPERIAL. However, Constellation Software is 1.08 times more volatile than CDN IMPERIAL BANK. It trades about 0.15 of its potential returns per unit of risk. CDN IMPERIAL BANK is currently generating about -0.12 per unit of risk. If you would invest  303,000  in Constellation Software on December 3, 2024 and sell it today you would earn a total of  24,500  from holding Constellation Software or generate 8.09% 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.  CDN IMPERIAL BANK

Constellation Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 1 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

CDN IMPERIAL BANK

Risk-Adjusted Performance

Very Weak

Over the last 90 days CDN IMPERIAL BANK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, CDN IMPERIAL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Constellation Software and CDN IMPERIAL

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

The idea behind Constellation Software and CDN IMPERIAL BANK 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..