Correlation Between Constellation Brands and Scilex Holding

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

Diversification Opportunities for Constellation Brands and Scilex Holding

0.54

Correlation Coefficient

Constellation Brands  Scilex Holding

Very weak diversification

The 3 months correlation between Constellation and Scilex is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and Scilex Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scilex Holding 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 Scilex Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scilex Holding has no effect on the direction of Constellation Brands i.e., Constellation Brands and Scilex Holding go up and down completely randomly.

Pair Corralation between Constellation Brands and Scilex Holding

Considering the 90-day investment horizon Constellation Brands Class is expected to generate 0.18 times more return on investment than Scilex Holding. However, Constellation Brands Class is 5.58 times less risky than Scilex Holding. It trades about -0.13 of its potential returns per unit of risk. Scilex Holding is currently generating about -0.06 per unit of risk. If you would invest  22,502  in Constellation Brands Class on December 22, 2024 and sell it today you would lose (4,760) from holding Constellation Brands Class or give up 21.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Constellation Brands Class  vs.  Scilex Holding

Constellation Brands

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Scilex Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scilex Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Constellation Brands and Scilex Holding

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

The idea behind Constellation Brands Class and Scilex Holding 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.