Correlation Between Constellation Brands and 70082LAB3

Can any of the company-specific risk be diversified away by investing in both Constellation Brands and 70082LAB3 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 70082LAB3 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 US70082LAB36, you can compare the effects of market volatilities on Constellation Brands and 70082LAB3 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 70082LAB3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and 70082LAB3.

Diversification Opportunities for Constellation Brands and 70082LAB3

-0.57

Correlation Coefficient

Constellation Brands  70082LAB3

Excellent diversification

The 3 months correlation between Constellation and 70082LAB3 is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and US70082LAB36 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US70082LAB36 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 70082LAB3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US70082LAB36 has no effect on the direction of Constellation Brands i.e., Constellation Brands and 70082LAB3 go up and down completely randomly.

Pair Corralation between Constellation Brands and 70082LAB3

Considering the 90-day investment horizon Constellation Brands Class is expected to under-perform the 70082LAB3. But the stock apears to be less risky and, when comparing its historical volatility, Constellation Brands Class is 1.0 times less risky than 70082LAB3. The stock trades about -0.16 of its potential returns per unit of risk. The US70082LAB36 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  8,637  in US70082LAB36 on September 28, 2024 and sell it today you would earn a total of  363.00  from holding US70082LAB36 or generate 4.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	66.67%
Values	Daily Returns

Constellation Brands Class  vs.  US70082LAB36

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

US70082LAB36

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US70082LAB36 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, 70082LAB3 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Constellation Brands and 70082LAB3

The main advantage of trading using opposite Constellation Brands and 70082LAB3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands position performs unexpectedly, 70082LAB3 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 70082LAB3 will offset losses from the drop in 70082LAB3's long position.

The idea behind Constellation Brands Class and US70082LAB36 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.