Correlation Between Constellation Brands and Diageo Plc
Can any of the company-specific risk be diversified away by investing in both Constellation Brands and Diageo Plc 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 Diageo Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellation Brands and Diageo plc, you can compare the effects of market volatilities on Constellation Brands and Diageo Plc 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 Diageo Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and Diageo Plc.
Diversification Opportunities for Constellation Brands and Diageo Plc
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Constellation and Diageo is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands and Diageo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc 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 Diageo Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo plc has no effect on the direction of Constellation Brands i.e., Constellation Brands and Diageo Plc go up and down completely randomly.
Pair Corralation between Constellation Brands and Diageo Plc
Assuming the 90 days trading horizon Constellation Brands is expected to under-perform the Diageo Plc. But the stock apears to be less risky and, when comparing its historical volatility, Constellation Brands is 1.47 times less risky than Diageo Plc. The stock trades about -0.08 of its potential returns per unit of risk. The Diageo plc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 12,400 in Diageo plc on September 29, 2024 and sell it today you would lose (400.00) from holding Diageo plc or give up 3.23% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 98.41% |
Values | Daily Returns |
Constellation Brands vs. Diageo plc
Performance |
Timeline |
Constellation Brands |
Diageo plc |
Constellation Brands and Diageo Plc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Constellation Brands and Diageo Plc
The main advantage of trading using opposite Constellation Brands and Diageo Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands position performs unexpectedly, Diageo Plc 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 Diageo Plc will offset losses from the drop in Diageo Plc's long position.Constellation Brands vs. Solstad Offshore ASA | Constellation Brands vs. CDN IMPERIAL BANK | Constellation Brands vs. REVO INSURANCE SPA | Constellation Brands vs. SIEM OFFSHORE NEW |
Diageo Plc vs. Constellation Brands | Diageo Plc vs. Brown Forman | Diageo Plc vs. Thai Beverage Public | Diageo Plc vs. Rmy Cointreau SA |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |