Correlation Between Constellation Brands and ATT

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

Diversification Opportunities for Constellation Brands and ATT

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between Constellation and ATT is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of Constellation Brands i.e., Constellation Brands and ATT go up and down completely randomly.

Pair Corralation between Constellation Brands and ATT

Considering the 90-day investment horizon Constellation Brands Class is expected to generate 1.03 times more return on investment than ATT. However, Constellation Brands is 1.03 times more volatile than ATT Inc. It trades about 0.45 of its potential returns per unit of risk. ATT Inc is currently generating about 0.21 per unit of risk. If you would invest  24,709  in Constellation Brands Class on December 29, 2023 and sell it today you would earn a total of  2,495  from holding Constellation Brands Class or generate 10.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Constellation Brands Class  vs.  ATT Inc

 Performance 
       Timeline  
Constellation Brands 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Brands Class are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Constellation Brands showed solid returns over the last few months and may actually be approaching a breakup point.
ATT Inc 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, ATT may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Constellation Brands and ATT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Constellation Brands and ATT

The main advantage of trading using opposite Constellation Brands and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands position performs unexpectedly, ATT 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 ATT will offset losses from the drop in ATT's long position.
The idea behind Constellation Brands Class and ATT 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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