Correlation Between Sphere Entertainment and Constellation Brands

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

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

Diversification Opportunities for Sphere Entertainment and Constellation Brands

-0.23

Correlation Coefficient

Sphere Entertainment  Constellation Brands

Very good diversification

The 3 months correlation between Sphere and Constellation is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co and Constellation Brands Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Brands and Sphere Entertainment 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 Sphere Entertainment Co 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 Sphere Entertainment i.e., Sphere Entertainment and Constellation Brands go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Constellation Brands

Given the investment horizon of 90 days Sphere Entertainment Co is expected to under-perform the Constellation Brands. In addition to that, Sphere Entertainment is 1.08 times more volatile than Constellation Brands Class. It trades about -0.09 of its total potential returns per unit of risk. Constellation Brands Class is currently generating about -0.09 per unit of volatility. If you would invest  21,836  in Constellation Brands Class on December 30, 2024 and sell it today you would lose (3,462) from holding Constellation Brands Class or give up 15.85% of portfolio value over 90 days.

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

Sphere Entertainment Co  vs.  Constellation Brands Class

Sphere Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Constellation Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Constellation Brands Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sphere Entertainment and Constellation Brands

The main advantage of trading using opposite Sphere Entertainment and Constellation Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sphere Entertainment 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 Sphere Entertainment Co and Constellation Brands Class 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.