Correlation Between Grocery Outlet and CONSTELLATION

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

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

Diversification Opportunities for Grocery Outlet and CONSTELLATION

0.22

Correlation Coefficient

Grocery Outlet  CONSTELLATION

Modest diversification

The 3 months correlation between Grocery and CONSTELLATION is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding 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 Grocery Outlet 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 Grocery Outlet Holding 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 Grocery Outlet i.e., Grocery Outlet and CONSTELLATION go up and down completely randomly.

Pair Corralation between Grocery Outlet and CONSTELLATION

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the CONSTELLATION. In addition to that, Grocery Outlet is 1.66 times more volatile than CONSTELLATION BRANDS INC. It trades about -0.08 of its total potential returns per unit of risk. CONSTELLATION BRANDS INC is currently generating about 0.11 per unit of volatility. If you would invest  8,371  in CONSTELLATION BRANDS INC on October 21, 2024 and sell it today you would earn a total of  144.00  from holding CONSTELLATION BRANDS INC or generate 1.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	52.63%
Values	Daily Returns

Grocery Outlet Holding  vs.  CONSTELLATION BRANDS INC

Grocery Outlet Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grocery Outlet Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Grocery Outlet is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

CONSTELLATION BRANDS INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSTELLATION BRANDS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CONSTELLATION is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Grocery Outlet and CONSTELLATION

The main advantage of trading using opposite Grocery Outlet and CONSTELLATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grocery Outlet 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 Grocery Outlet Holding 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.