Correlation Between 00108WAF7 and CONSTELLATION

Can any of the company-specific risk be diversified away by investing in both 00108WAF7 and CONSTELLATION 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 00108WAF7 and CONSTELLATION into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AEP TEX INC and CONSTELLATION BRANDS INC, you can compare the effects of market volatilities on 00108WAF7 and CONSTELLATION 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 00108WAF7 with a short position of CONSTELLATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of 00108WAF7 and CONSTELLATION.

Diversification Opportunities for 00108WAF7 and CONSTELLATION

0.27

Correlation Coefficient

00108WAF7  CONSTELLATION

Modest diversification

The 3 months correlation between 00108WAF7 and CONSTELLATION is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding AEP TEX INC and CONSTELLATION BRANDS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSTELLATION BRANDS INC and 00108WAF7 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 AEP TEX INC are associated (or correlated) with CONSTELLATION. 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 INC has no effect on the direction of 00108WAF7 i.e., 00108WAF7 and CONSTELLATION go up and down completely randomly.

Pair Corralation between 00108WAF7 and CONSTELLATION

Assuming the 90 days trading horizon 00108WAF7 is expected to generate 1.93 times less return on investment than CONSTELLATION. In addition to that, 00108WAF7 is 1.42 times more volatile than CONSTELLATION BRANDS INC. It trades about 0.03 of its total potential returns per unit of risk. CONSTELLATION BRANDS INC is currently generating about 0.08 per unit of volatility. If you would invest  8,288  in CONSTELLATION BRANDS INC on December 30, 2024 and sell it today you would earn a total of  343.00  from holding CONSTELLATION BRANDS INC or generate 4.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.27%
Values	Daily Returns

AEP TEX INC  vs.  CONSTELLATION BRANDS INC

AEP TEX INC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AEP TEX INC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 00108WAF7 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CONSTELLATION BRANDS INC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CONSTELLATION BRANDS INC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CONSTELLATION is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 00108WAF7 and CONSTELLATION

The main advantage of trading using opposite 00108WAF7 and CONSTELLATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 00108WAF7 position performs unexpectedly, CONSTELLATION 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 will offset losses from the drop in CONSTELLATION's long position.

The idea behind AEP TEX INC and CONSTELLATION BRANDS INC 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.