Correlation Between Constellation Brands and Perseus Mining

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

Diversification Opportunities for Constellation Brands and Perseus Mining

0.83

Correlation Coefficient

Constellation Brands  Perseus Mining

Very poor diversification

The 3 months correlation between Constellation and Perseus is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and Perseus Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining 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 Perseus Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perseus Mining has no effect on the direction of Constellation Brands i.e., Constellation Brands and Perseus Mining go up and down completely randomly.

Pair Corralation between Constellation Brands and Perseus Mining

Considering the 90-day investment horizon Constellation Brands Class is expected to under-perform the Perseus Mining. But the stock apears to be less risky and, when comparing its historical volatility, Constellation Brands Class is 2.95 times less risky than Perseus Mining. The stock trades about -0.13 of its potential returns per unit of risk. The Perseus Mining Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  145.00  in Perseus Mining Limited on January 30, 2024 and sell it today you would earn a total of  6.00  from holding Perseus Mining Limited or generate 4.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Constellation Brands Class  vs.  Perseus Mining Limited

Constellation Brands

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Brands Class are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Constellation Brands is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Perseus Mining

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Perseus Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Constellation Brands and Perseus Mining

The main advantage of trading using opposite Constellation Brands and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands position performs unexpectedly, Perseus Mining 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 Perseus Mining will offset losses from the drop in Perseus Mining's long position.

The idea behind Constellation Brands Class and Perseus Mining Limited 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.