Correlation Between CONSTELLATION and Delek Drilling

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

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

Diversification Opportunities for CONSTELLATION and Delek Drilling

-0.67

Correlation Coefficient

CONSTELLATION  Delek Drilling

Excellent diversification

The 3 months correlation between CONSTELLATION and Delek is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding CONSTELLATION BRANDS INC and Delek Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Drilling and CONSTELLATION 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 INC are associated (or correlated) with Delek Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Drilling has no effect on the direction of CONSTELLATION i.e., CONSTELLATION and Delek Drilling go up and down completely randomly.

Pair Corralation between CONSTELLATION and Delek Drilling

Assuming the 90 days trading horizon CONSTELLATION BRANDS INC is expected to generate 14.67 times more return on investment than Delek Drilling. However, CONSTELLATION is 14.67 times more volatile than Delek Drilling . It trades about 0.08 of its potential returns per unit of risk. Delek Drilling is currently generating about 0.05 per unit of risk. If you would invest  8,914  in CONSTELLATION BRANDS INC on October 3, 2024 and sell it today you would lose (399.00) from holding CONSTELLATION BRANDS INC or give up 4.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	83.43%
Values	Daily Returns

CONSTELLATION BRANDS INC  vs.  Delek Drilling

CONSTELLATION BRANDS INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSTELLATION BRANDS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CONSTELLATION BRANDS INC investors.

Delek Drilling

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Delek Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CONSTELLATION and Delek Drilling

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

The idea behind CONSTELLATION BRANDS INC and Delek Drilling 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 Transaction History module to view history of all your transactions and understand their impact on performance.