Correlation Between Thai Beverage and Constellation Brands

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

By analyzing existing cross correlation between Thai Beverage Public and Constellation Brands, you can compare the effects of market volatilities on Thai Beverage and Constellation Brands 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 Thai Beverage with a short position of Constellation Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Beverage and Constellation Brands.

Diversification Opportunities for Thai Beverage and Constellation Brands

0.34

Correlation Coefficient

Thai Beverage  Constellation Brands

Weak diversification

The 3 months correlation between Thai and Constellation is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Thai Beverage Public and Constellation Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Brands and Thai Beverage 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 Thai Beverage Public are associated (or correlated) with Constellation Brands. 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 has no effect on the direction of Thai Beverage i.e., Thai Beverage and Constellation Brands go up and down completely randomly.

Pair Corralation between Thai Beverage and Constellation Brands

Assuming the 90 days horizon Thai Beverage Public is expected to generate 4.62 times more return on investment than Constellation Brands. However, Thai Beverage is 4.62 times more volatile than Constellation Brands. It trades about 0.05 of its potential returns per unit of risk. Constellation Brands is currently generating about 0.03 per unit of risk. If you would invest  16.00  in Thai Beverage Public on September 28, 2024 and sell it today you would earn a total of  21.00  from holding Thai Beverage Public or generate 131.25% return on investment over 90 days.

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

Thai Beverage Public  vs.  Constellation Brands

Thai Beverage Public

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Beverage Public are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Thai Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Constellation Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellation Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Constellation Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Thai Beverage and Constellation Brands

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

The idea behind Thai Beverage Public and Constellation Brands 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.