Correlation Between Constellation Brands and Aristocrat Group

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

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

Diversification Opportunities for Constellation Brands and Aristocrat Group

0.37

Correlation Coefficient

Constellation Brands  Aristocrat Group

Weak diversification

The 3 months correlation between Constellation and Aristocrat is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and Aristocrat Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Group Corp and Constellation Brands 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 Brands Class are associated (or correlated) with Aristocrat Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Group Corp has no effect on the direction of Constellation Brands i.e., Constellation Brands and Aristocrat Group go up and down completely randomly.

Pair Corralation between Constellation Brands and Aristocrat Group

Considering the 90-day investment horizon Constellation Brands Class is expected to generate 0.21 times more return on investment than Aristocrat Group. However, Constellation Brands Class is 4.76 times less risky than Aristocrat Group. It trades about -0.02 of its potential returns per unit of risk. Aristocrat Group Corp is currently generating about -0.15 per unit of risk. If you would invest  24,574  in Constellation Brands Class on September 3, 2024 and sell it today you would lose (479.00) from holding Constellation Brands Class or give up 1.95% of portfolio value over 90 days.

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

Constellation Brands Class  vs.  Aristocrat Group Corp

Constellation Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellation Brands Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Constellation Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aristocrat Group Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aristocrat Group Corp 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 fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Constellation Brands and Aristocrat Group

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

The idea behind Constellation Brands Class and Aristocrat Group Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..