Correlation Between Destination and CONSTELLATION

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

By analyzing existing cross correlation between Destination XL Group and CONSTELLATION BRANDS INC, you can compare the effects of market volatilities on Destination and CONSTELLATION 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 Destination with a short position of CONSTELLATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Destination and CONSTELLATION.

Diversification Opportunities for Destination and CONSTELLATION

0.0

Correlation Coefficient

Destination  CONSTELLATION

Pay attention - limited upside

The 3 months correlation between Destination and CONSTELLATION is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Destination XL Group and CONSTELLATION BRANDS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSTELLATION BRANDS INC and Destination 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 Destination XL Group are associated (or correlated) with CONSTELLATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSTELLATION BRANDS INC has no effect on the direction of Destination i.e., Destination and CONSTELLATION go up and down completely randomly.

Pair Corralation between Destination and CONSTELLATION

Given the investment horizon of 90 days Destination is expected to generate 1.36 times less return on investment than CONSTELLATION. In addition to that, Destination is 1.57 times more volatile than CONSTELLATION BRANDS INC. It trades about 0.13 of its total potential returns per unit of risk. CONSTELLATION BRANDS INC is currently generating about 0.27 per unit of volatility. If you would invest  9,111  in CONSTELLATION BRANDS INC on October 23, 2024 and sell it today you would earn a total of  646.00  from holding CONSTELLATION BRANDS INC or generate 7.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	83.33%
Values	Daily Returns

Destination XL Group  vs.  CONSTELLATION BRANDS INC

Destination XL Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Destination XL Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Destination may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CONSTELLATION BRANDS INC

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CONSTELLATION BRANDS INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CONSTELLATION is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Destination and CONSTELLATION

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

The idea behind Destination XL Group and CONSTELLATION BRANDS INC 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.