Correlation Between CONSTELLATION and Nippon Steel

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

Diversification Opportunities for CONSTELLATION and Nippon Steel

0.27

Correlation Coefficient

CONSTELLATION  Nippon Steel

Modest diversification

The 3 months correlation between CONSTELLATION and Nippon is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding CONSTELLATION BRANDS INC and Nippon Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel Corp 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 Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel Corp has no effect on the direction of CONSTELLATION i.e., CONSTELLATION and Nippon Steel go up and down completely randomly.

Pair Corralation between CONSTELLATION and Nippon Steel

Assuming the 90 days trading horizon CONSTELLATION is expected to generate 1.63 times less return on investment than Nippon Steel. In addition to that, CONSTELLATION is 1.28 times more volatile than Nippon Steel Corp. It trades about 0.03 of its total potential returns per unit of risk. Nippon Steel Corp is currently generating about 0.07 per unit of volatility. If you would invest  677.00  in Nippon Steel Corp on October 6, 2024 and sell it today you would earn a total of  14.00  from holding Nippon Steel Corp or generate 2.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.0%
Values	Daily Returns

CONSTELLATION BRANDS INC  vs.  Nippon Steel Corp

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 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.

Nippon Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Nippon Steel is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CONSTELLATION and Nippon Steel

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

The idea behind CONSTELLATION BRANDS INC and Nippon Steel 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.