Correlation Between Ishares Trust and CONSTELLATION

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

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

Diversification Opportunities for Ishares Trust and CONSTELLATION

-0.36

Correlation Coefficient

Ishares Trust  CONSTELLATION

Very good diversification

The 3 months correlation between Ishares and CONSTELLATION is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Trust 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 Ishares Trust 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 Ishares Trust 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 Ishares Trust i.e., Ishares Trust and CONSTELLATION go up and down completely randomly.

Pair Corralation between Ishares Trust and CONSTELLATION

Given the investment horizon of 90 days Ishares Trust is expected to generate 0.78 times more return on investment than CONSTELLATION. However, Ishares Trust is 1.29 times less risky than CONSTELLATION. It trades about 0.09 of its potential returns per unit of risk. CONSTELLATION BRANDS INC is currently generating about -0.01 per unit of risk. If you would invest  3,090  in Ishares Trust on October 3, 2024 and sell it today you would earn a total of  205.00  from holding Ishares Trust or generate 6.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.97%
Values	Daily Returns

Ishares Trust   vs.  CONSTELLATION BRANDS INC

Ishares Trust

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Ishares Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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

Pair Trading with Ishares Trust and CONSTELLATION

The main advantage of trading using opposite Ishares Trust and CONSTELLATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Trust 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 Ishares Trust 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.