Correlation Between Constellation Brands and Philip Morris
Can any of the company-specific risk be diversified away by investing in both Constellation Brands and Philip Morris 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 Philip Morris 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 Philip Morris International, you can compare the effects of market volatilities on Constellation Brands and Philip Morris 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 Philip Morris. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and Philip Morris.
Diversification Opportunities for Constellation Brands and Philip Morris
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Constellation and Philip is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and Philip Morris International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philip Morris Intern 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 Philip Morris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philip Morris Intern has no effect on the direction of Constellation Brands i.e., Constellation Brands and Philip Morris go up and down completely randomly.
Pair Corralation between Constellation Brands and Philip Morris
Considering the 90-day investment horizon Constellation Brands Class is expected to under-perform the Philip Morris. In addition to that, Constellation Brands is 1.15 times more volatile than Philip Morris International. It trades about -0.02 of its total potential returns per unit of risk. Philip Morris International is currently generating about 0.1 per unit of volatility. If you would invest 9,010 in Philip Morris International on November 27, 2024 and sell it today you would earn a total of 6,430 from holding Philip Morris International or generate 71.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Constellation Brands Class vs. Philip Morris International
Performance |
Timeline |
Constellation Brands |
Philip Morris Intern |
Constellation Brands and Philip Morris Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Constellation Brands and Philip Morris
The main advantage of trading using opposite Constellation Brands and Philip Morris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands position performs unexpectedly, Philip Morris 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 Philip Morris will offset losses from the drop in Philip Morris' long position.Constellation Brands vs. Brown Forman | ||
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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