Correlation Between Constellation Brands and Plutonian Acquisition

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

Diversification Opportunities for Constellation Brands and Plutonian Acquisition

0.47

Correlation Coefficient

Constellation Brands  Plutonian Acquisition

Very weak diversification

The 3 months correlation between Constellation and Plutonian is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and Plutonian Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plutonian Acquisition 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 Plutonian Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plutonian Acquisition has no effect on the direction of Constellation Brands i.e., Constellation Brands and Plutonian Acquisition go up and down completely randomly.

Pair Corralation between Constellation Brands and Plutonian Acquisition

Considering the 90-day investment horizon Constellation Brands Class is expected to generate 0.21 times more return on investment than Plutonian Acquisition. However, Constellation Brands Class is 4.69 times less risky than Plutonian Acquisition. It trades about 0.02 of its potential returns per unit of risk. Plutonian Acquisition Corp is currently generating about -0.04 per unit of risk. If you would invest  20,904  in Constellation Brands Class on September 28, 2024 and sell it today you would earn a total of  1,523  from holding Constellation Brands Class or generate 7.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	71.52%
Values	Daily Returns

Constellation Brands Class  vs.  Plutonian Acquisition Corp

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Plutonian Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plutonian Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Plutonian Acquisition is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Constellation Brands and Plutonian Acquisition

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

The idea behind Constellation Brands Class and Plutonian Acquisition Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.