Correlation Between Mechanics Bank and Constellation Software

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

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

Diversification Opportunities for Mechanics Bank and Constellation Software

-0.7

Correlation Coefficient

Mechanics Bank  Constellation Software

Excellent diversification

The 3 months correlation between Mechanics and Constellation is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Mechanics Bank and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Software and Mechanics Bank 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 Mechanics Bank are associated (or correlated) with Constellation Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Software has no effect on the direction of Mechanics Bank i.e., Mechanics Bank and Constellation Software go up and down completely randomly.

Pair Corralation between Mechanics Bank and Constellation Software

If you would invest  262,000  in Constellation Software on February 4, 2024 and sell it today you would earn a total of  3,747  from holding Constellation Software or generate 1.43% return on investment over 90 days.

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

Mechanics Bank  vs.  Constellation Software

Mechanics Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mechanics Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical indicators, Mechanics Bank may actually be approaching a critical reversion point that can send shares even higher in June 2024.

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. Despite nearly stable basic indicators, Constellation Software is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mechanics Bank and Constellation Software

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

The idea behind Mechanics Bank and Constellation Software 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.