Correlation Between Constellation Software and Varta AG

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

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

Diversification Opportunities for Constellation Software and Varta AG

-0.47

Correlation Coefficient

Constellation Software  Varta AG

Very good diversification

The 3 months correlation between Constellation and Varta is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and Varta AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varta AG 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 Varta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varta AG has no effect on the direction of Constellation Software i.e., Constellation Software and Varta AG go up and down completely randomly.

Pair Corralation between Constellation Software and Varta AG

If you would invest  242,644  in Constellation Software on October 14, 2024 and sell it today you would earn a total of  48,356  from holding Constellation Software or generate 19.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.0%
Values	Daily Returns

Constellation Software  vs.  Varta AG

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.

Varta AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Varta AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic 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 Varta AG

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

The idea behind Constellation Software and Varta AG 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.