Correlation Between Allied Gaming and CONSTELLATION

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

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

Diversification Opportunities for Allied Gaming and CONSTELLATION

0.41

Correlation Coefficient

Allied Gaming  CONSTELLATION

Very weak diversification

The 3 months correlation between Allied and CONSTELLATION is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Allied Gaming Entertainment 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 Allied Gaming 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 Allied Gaming Entertainment 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 Allied Gaming i.e., Allied Gaming and CONSTELLATION go up and down completely randomly.

Pair Corralation between Allied Gaming and CONSTELLATION

Given the investment horizon of 90 days Allied Gaming Entertainment is expected to generate 4.79 times more return on investment than CONSTELLATION. However, Allied Gaming is 4.79 times more volatile than CONSTELLATION BRANDS INC. It trades about 0.26 of its potential returns per unit of risk. CONSTELLATION BRANDS INC is currently generating about -0.13 per unit of risk. If you would invest  74.00  in Allied Gaming Entertainment on October 23, 2024 and sell it today you would earn a total of  16.00  from holding Allied Gaming Entertainment or generate 21.62% return on investment over 90 days.

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

Allied Gaming Entertainment  vs.  CONSTELLATION BRANDS INC

Allied Gaming Entert

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allied Gaming Entertainment 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 rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Allied Gaming and CONSTELLATION

The main advantage of trading using opposite Allied Gaming and CONSTELLATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Gaming 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 Allied Gaming Entertainment 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.