Correlation Between MGP Ingredients and Constellation Brands
Can any of the company-specific risk be diversified away by investing in both MGP Ingredients 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 MGP Ingredients and Constellation Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGP Ingredients and Constellation Brands Class, you can compare the effects of market volatilities on MGP Ingredients 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 MGP Ingredients with a short position of Constellation Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGP Ingredients and Constellation Brands.
Diversification Opportunities for MGP Ingredients and Constellation Brands
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MGP and Constellation is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding MGP Ingredients and Constellation Brands Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Brands and MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients i.e., MGP Ingredients and Constellation Brands go up and down completely randomly.
Pair Corralation between MGP Ingredients and Constellation Brands
Given the investment horizon of 90 days MGP Ingredients is expected to under-perform the Constellation Brands. In addition to that, MGP Ingredients is 1.66 times more volatile than Constellation Brands Class. It trades about -0.23 of its total potential returns per unit of risk. Constellation Brands Class is currently generating about -0.12 per unit of volatility. If you would invest 24,574 in Constellation Brands Class on November 2, 2024 and sell it today you would lose (6,142) from holding Constellation Brands Class or give up 24.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGP Ingredients vs. Constellation Brands Class
Performance |
| Timeline |
| MGP Ingredients |
| Constellation Brands |
MGP Ingredients and Constellation Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGP Ingredients and Constellation Brands
The main advantage of trading using opposite MGP Ingredients and Constellation Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGP Ingredients 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.| MGP Ingredients vs. Brown Forman | MGP Ingredients vs. Diageo PLC ADR | MGP Ingredients vs. Brown Forman | MGP Ingredients vs. Constellation Brands Class |
| Constellation Brands vs. Brown Forman | Constellation Brands vs. MGP Ingredients | Constellation Brands vs. Brown Forman | Constellation Brands vs. Diageo PLC ADR |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |