Correlation Between Constellation Brands and MGP Ingredients
Can any of the company-specific risk be diversified away by investing in both Constellation Brands and MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients, you can compare the effects of market volatilities on Constellation Brands and MGP Ingredients 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 MGP Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and MGP Ingredients.
Diversification Opportunities for Constellation Brands and MGP Ingredients
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Constellation and MGP is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients 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 MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of Constellation Brands i.e., Constellation Brands and MGP Ingredients go up and down completely randomly.
Pair Corralation between Constellation Brands and MGP Ingredients
Considering the 90-day investment horizon Constellation Brands Class is expected to generate 0.41 times more return on investment than MGP Ingredients. However, Constellation Brands Class is 2.43 times less risky than MGP Ingredients. It trades about 0.01 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.08 per unit of risk. If you would invest 23,793 in Constellation Brands Class on August 24, 2024 and sell it today you would earn a total of 180.00 from holding Constellation Brands Class or generate 0.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Constellation Brands Class vs. MGP Ingredients
Performance |
| Timeline |
| Constellation Brands |
| MGP Ingredients |
Constellation Brands and MGP Ingredients Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellation Brands and MGP Ingredients
The main advantage of trading using opposite Constellation Brands and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands position performs unexpectedly, MGP Ingredients 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 MGP Ingredients will offset losses from the drop in MGP Ingredients' long position.| Constellation Brands vs. Brown Forman | Constellation Brands vs. Duckhorn Portfolio | Constellation Brands vs. MGP Ingredients | Constellation Brands vs. Brown Forman |
| MGP Ingredients vs. Brown Forman | MGP Ingredients vs. Diageo PLC ADR | MGP Ingredients vs. Brown Forman | MGP Ingredients vs. Constellation Brands Class |
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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