Correlation Between AmTrust Financial and CONSTELLATION

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

By analyzing existing cross correlation between AmTrust Financial Services and CONSTELLATION BRANDS INC, you can compare the effects of market volatilities on AmTrust Financial and CONSTELLATION 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 AmTrust Financial with a short position of CONSTELLATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of AmTrust Financial and CONSTELLATION.

Diversification Opportunities for AmTrust Financial and CONSTELLATION

0.04

Correlation Coefficient

AmTrust Financial  CONSTELLATION

Significant diversification

The 3 months correlation between AmTrust and CONSTELLATION is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services and CONSTELLATION BRANDS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSTELLATION BRANDS INC and AmTrust Financial 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 AmTrust Financial Services are associated (or correlated) with CONSTELLATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSTELLATION BRANDS INC has no effect on the direction of AmTrust Financial i.e., AmTrust Financial and CONSTELLATION go up and down completely randomly.

Pair Corralation between AmTrust Financial and CONSTELLATION

Assuming the 90 days horizon AmTrust Financial is expected to generate 2.67 times less return on investment than CONSTELLATION. But when comparing it to its historical volatility, AmTrust Financial Services is 1.46 times less risky than CONSTELLATION. It trades about 0.08 of its potential returns per unit of risk. CONSTELLATION BRANDS INC is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  8,294  in CONSTELLATION BRANDS INC on October 23, 2024 and sell it today you would earn a total of  180.00  from holding CONSTELLATION BRANDS INC or generate 2.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	55.56%
Values	Daily Returns

AmTrust Financial Services  vs.  CONSTELLATION BRANDS INC

AmTrust Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, AmTrust Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

CONSTELLATION BRANDS INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSTELLATION BRANDS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CONSTELLATION is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AmTrust Financial and CONSTELLATION

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

The idea behind AmTrust Financial Services and CONSTELLATION BRANDS INC 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.