Correlation Between Constellation Brands and Corporate Office

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

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

Diversification Opportunities for Constellation Brands and Corporate Office

0.42

Correlation Coefficient

Constellation Brands  Corporate Office

Very weak diversification

The 3 months correlation between Constellation and Corporate is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands and Corporate Office Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporate Office Pro 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 Corporate Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporate Office Pro has no effect on the direction of Constellation Brands i.e., Constellation Brands and Corporate Office go up and down completely randomly.

Pair Corralation between Constellation Brands and Corporate Office

Assuming the 90 days trading horizon Constellation Brands is expected to under-perform the Corporate Office. But the stock apears to be less risky and, when comparing its historical volatility, Constellation Brands is 1.05 times less risky than Corporate Office. The stock trades about -0.21 of its potential returns per unit of risk. The Corporate Office Properties is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,010  in Corporate Office Properties on October 5, 2024 and sell it today you would lose (10.00) from holding Corporate Office Properties or give up 0.33% of portfolio value over 90 days.

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

Constellation Brands  vs.  Corporate Office Properties

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.

Corporate Office Pro

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Corporate Office Properties are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Corporate Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Constellation Brands and Corporate Office

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

The idea behind Constellation Brands and Corporate Office Properties 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.