Correlation Between Palmer Square and CONSTELLATION

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

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

Diversification Opportunities for Palmer Square and CONSTELLATION

-0.35

Correlation Coefficient

Palmer Square  CONSTELLATION

Very good diversification

The 3 months correlation between Palmer and CONSTELLATION is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Palmer Square Ultra Short 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 Palmer Square 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 Palmer Square Ultra Short 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 Palmer Square i.e., Palmer Square and CONSTELLATION go up and down completely randomly.

Pair Corralation between Palmer Square and CONSTELLATION

Assuming the 90 days horizon Palmer Square Ultra Short is expected to generate 0.55 times more return on investment than CONSTELLATION. However, Palmer Square Ultra Short is 1.8 times less risky than CONSTELLATION. It trades about -0.01 of its potential returns per unit of risk. CONSTELLATION BRANDS INC is currently generating about -0.15 per unit of risk. If you would invest  1,990  in Palmer Square Ultra Short on October 3, 2024 and sell it today you would lose (3.00) from holding Palmer Square Ultra Short or give up 0.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.94%
Values	Daily Returns

Palmer Square Ultra Short  vs.  CONSTELLATION BRANDS INC

Palmer Square Ultra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Palmer Square Ultra Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Palmer Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Palmer Square and CONSTELLATION

The main advantage of trading using opposite Palmer Square and CONSTELLATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palmer Square 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 Palmer Square Ultra Short 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.