Correlation Between Constellation Software and ADF

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

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

Diversification Opportunities for Constellation Software and ADF

-0.39

Correlation Coefficient

Constellation Software  ADF

Very good diversification

The 3 months correlation between Constellation and ADF is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and ADF Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADF Group 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 ADF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADF Group has no effect on the direction of Constellation Software i.e., Constellation Software and ADF go up and down completely randomly.

Pair Corralation between Constellation Software and ADF

Assuming the 90 days trading horizon Constellation Software is expected to under-perform the ADF. But the stock apears to be less risky and, when comparing its historical volatility, Constellation Software is 3.88 times less risky than ADF. The stock trades about -0.15 of its potential returns per unit of risk. The ADF Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  747.00  in ADF Group on May 18, 2025 and sell it today you would earn a total of  113.00  from holding ADF Group or generate 15.13% return on investment over 90 days.

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

Constellation Software  vs.  ADF Group

Constellation Software

Risk-Adjusted Performance

Weakest

Over the last 90 days Constellation Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in September 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ADF Group

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in ADF Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, ADF displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Constellation Software and ADF

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

The idea behind Constellation Software and ADF Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.