Correlation Between Universal Display and Constellation Brands
Can any of the company-specific risk be diversified away by investing in both Universal Display 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 Universal Display and Constellation Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Display and Constellation Brands Class, you can compare the effects of market volatilities on Universal Display 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 Universal Display with a short position of Constellation Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Display and Constellation Brands.
Diversification Opportunities for Universal Display and Constellation Brands
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Universal and Constellation is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display and Constellation Brands Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Brands and Universal Display 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 Universal Display 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 Universal Display i.e., Universal Display and Constellation Brands go up and down completely randomly.
Pair Corralation between Universal Display and Constellation Brands
Given the investment horizon of 90 days Universal Display is expected to generate 2.19 times more return on investment than Constellation Brands. However, Universal Display is 2.19 times more volatile than Constellation Brands Class. It trades about 0.01 of its potential returns per unit of risk. Constellation Brands Class is currently generating about 0.01 per unit of risk. If you would invest 16,870 in Universal Display on August 28, 2024 and sell it today you would earn a total of 64.00 from holding Universal Display or generate 0.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Display vs. Constellation Brands Class
Performance |
| Timeline |
| Universal Display |
| Constellation Brands |
Universal Display and Constellation Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Display and Constellation Brands
The main advantage of trading using opposite Universal Display and Constellation Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Display 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.The idea behind Universal Display and Constellation Brands Class 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.| Constellation Brands vs. Brown Forman | Constellation Brands vs. Duckhorn Portfolio | Constellation Brands vs. MGP Ingredients | Constellation Brands vs. Brown Forman |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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