Correlation Between Constellation Software and NESTE OYJ

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

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

Diversification Opportunities for Constellation Software and NESTE OYJ

-0.45

Correlation Coefficient

Constellation Software  NESTE OYJ

Very good diversification

The 3 months correlation between Constellation and NESTE is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and NESTE OYJ UNSPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NESTE OYJ UNSPADR 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 NESTE OYJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NESTE OYJ UNSPADR has no effect on the direction of Constellation Software i.e., Constellation Software and NESTE OYJ go up and down completely randomly.

Pair Corralation between Constellation Software and NESTE OYJ

Assuming the 90 days trading horizon Constellation Software is expected to under-perform the NESTE OYJ. But the stock apears to be less risky and, when comparing its historical volatility, Constellation Software is 1.91 times less risky than NESTE OYJ. The stock trades about -0.22 of its potential returns per unit of risk. The NESTE OYJ UNSPADR is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  635.00  in NESTE OYJ UNSPADR on October 8, 2024 and sell it today you would lose (35.00) from holding NESTE OYJ UNSPADR or give up 5.51% of portfolio value over 90 days.

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

Constellation Software  vs.  NESTE OYJ UNSPADR

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

NESTE OYJ UNSPADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Constellation Software and NESTE OYJ

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

The idea behind Constellation Software and NESTE OYJ UNSPADR 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.