Correlation Between HEALTHSTREAM and Constellation Brands

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

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

Diversification Opportunities for HEALTHSTREAM and Constellation Brands

0.27

Correlation Coefficient

HEALTHSTREAM  Constellation Brands

Modest diversification

The 3 months correlation between HEALTHSTREAM and Constellation is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding HEALTHSTREAM and Constellation Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Brands and HEALTHSTREAM 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 HEALTHSTREAM are associated (or correlated) with Constellation Brands. 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 has no effect on the direction of HEALTHSTREAM i.e., HEALTHSTREAM and Constellation Brands go up and down completely randomly.

Pair Corralation between HEALTHSTREAM and Constellation Brands

Assuming the 90 days trading horizon HEALTHSTREAM is expected to generate 0.35 times more return on investment than Constellation Brands. However, HEALTHSTREAM is 2.89 times less risky than Constellation Brands. It trades about -0.02 of its potential returns per unit of risk. Constellation Brands is currently generating about -0.25 per unit of risk. If you would invest  3,060  in HEALTHSTREAM on October 27, 2024 and sell it today you would lose (20.00) from holding HEALTHSTREAM or give up 0.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

HEALTHSTREAM  vs.  Constellation Brands

HEALTHSTREAM

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HEALTHSTREAM are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HEALTHSTREAM unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with HEALTHSTREAM and Constellation Brands

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

The idea behind HEALTHSTREAM and Constellation Brands 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.