Correlation Between Constellation Brands and TDH Holdings

Can any of the company-specific risk be diversified away by investing in both Constellation Brands and TDH Holdings 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 TDH Holdings 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 TDH Holdings, you can compare the effects of market volatilities on Constellation Brands and TDH Holdings 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 TDH Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and TDH Holdings.

Diversification Opportunities for Constellation Brands and TDH Holdings

-0.42

Correlation Coefficient

Constellation Brands  TDH Holdings

Very good diversification

The 3 months correlation between Constellation and TDH is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and TDH Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TDH Holdings 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 TDH Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TDH Holdings has no effect on the direction of Constellation Brands i.e., Constellation Brands and TDH Holdings go up and down completely randomly.

Pair Corralation between Constellation Brands and TDH Holdings

Considering the 90-day investment horizon Constellation Brands Class is expected to under-perform the TDH Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Constellation Brands Class is 2.67 times less risky than TDH Holdings. The stock trades about -0.05 of its potential returns per unit of risk. The TDH Holdings is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  116.00  in TDH Holdings on September 13, 2024 and sell it today you would lose (4.11) from holding TDH Holdings or give up 3.54% of portfolio value over 90 days.

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

Constellation Brands Class  vs.  TDH Holdings

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.

TDH Holdings

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Constellation Brands and TDH Holdings

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

The idea behind Constellation Brands Class and TDH Holdings 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.