Correlation Between Constellation Brands and CDN IMPERIAL

Can any of the company-specific risk be diversified away by investing in both Constellation Brands and CDN IMPERIAL 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 CDN IMPERIAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Constellation Brands and CDN IMPERIAL BANK, you can compare the effects of market volatilities on Constellation Brands and CDN IMPERIAL 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 CDN IMPERIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and CDN IMPERIAL.

Diversification Opportunities for Constellation Brands and CDN IMPERIAL

0.22

Correlation Coefficient

Constellation Brands  CDN IMPERIAL

Modest diversification

The 3 months correlation between Constellation and CDN is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands and CDN IMPERIAL BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDN IMPERIAL BANK 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 are associated (or correlated) with CDN IMPERIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDN IMPERIAL BANK has no effect on the direction of Constellation Brands i.e., Constellation Brands and CDN IMPERIAL go up and down completely randomly.

Pair Corralation between Constellation Brands and CDN IMPERIAL

Assuming the 90 days trading horizon Constellation Brands is expected to under-perform the CDN IMPERIAL. In addition to that, Constellation Brands is 1.29 times more volatile than CDN IMPERIAL BANK. It trades about -0.05 of its total potential returns per unit of risk. CDN IMPERIAL BANK is currently generating about 0.27 per unit of volatility. If you would invest  4,241  in CDN IMPERIAL BANK on September 30, 2024 and sell it today you would earn a total of  1,802  from holding CDN IMPERIAL BANK or generate 42.49% return on investment over 90 days.

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

Constellation Brands  vs.  CDN IMPERIAL BANK

Constellation Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellation Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Constellation Brands is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

CDN IMPERIAL BANK

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, CDN IMPERIAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Constellation Brands and CDN IMPERIAL

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

The idea behind Constellation Brands and CDN IMPERIAL BANK 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.