Correlation Between Constellation Brands and American Scientf

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

Diversification Opportunities for Constellation Brands and American Scientf

-0.88

Correlation Coefficient

Constellation Brands  American Scientf

Pay attention - limited upside

The 3 months correlation between Constellation and American is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and American Scientf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Scientf 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 American Scientf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Scientf has no effect on the direction of Constellation Brands i.e., Constellation Brands and American Scientf go up and down completely randomly.

Pair Corralation between Constellation Brands and American Scientf

Considering the 90-day investment horizon Constellation Brands is expected to generate 156.11 times less return on investment than American Scientf. But when comparing it to its historical volatility, Constellation Brands Class is 38.44 times less risky than American Scientf. It trades about 0.01 of its potential returns per unit of risk. American Scientf is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.01  in American Scientf on October 11, 2024 and sell it today you would earn a total of  0.00  from holding American Scientf or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Constellation Brands Class  vs.  American Scientf

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

American Scientf

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Scientf are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, American Scientf showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Constellation Brands and American Scientf

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

The idea behind Constellation Brands Class and American Scientf 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.