Correlation Between Constellation Brands and Vistra Energy

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

Diversification Opportunities for Constellation Brands and Vistra Energy

-0.54

Correlation Coefficient

Constellation Brands  Vistra Energy

Excellent diversification

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

Pair Corralation between Constellation Brands and Vistra Energy

Considering the 90-day investment horizon Constellation Brands Class is expected to under-perform the Vistra Energy. But the stock apears to be less risky and, when comparing its historical volatility, Constellation Brands Class is 3.12 times less risky than Vistra Energy. The stock trades about -0.04 of its potential returns per unit of risk. The Vistra Energy Corp is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  7,565  in Vistra Energy Corp on September 5, 2024 and sell it today you would earn a total of  7,851  from holding Vistra Energy Corp or generate 103.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Constellation Brands Class  vs.  Vistra Energy 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 fairly strong basic indicators, Constellation Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vistra Energy Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Energy Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Vistra Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Constellation Brands and Vistra Energy

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

The idea behind Constellation Brands Class and Vistra Energy 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.