Correlation Between Constellation Brands and Chesapeake Lodging

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

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

Diversification Opportunities for Constellation Brands and Chesapeake Lodging

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Correlation Coefficient

Constellation Brands  Chesapeake Lodging

Pay attention - limited upside

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

Pair Corralation between Constellation Brands and Chesapeake Lodging

If you would invest  21,009  in Constellation Brands Class on October 10, 2024 and sell it today you would earn a total of  842.00  from holding Constellation Brands Class or generate 4.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Constellation Brands Class  vs.  Chesapeake Lodging Trust

Constellation Brands

Risk-Adjusted Performance

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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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Chesapeake Lodging Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Lodging Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Chesapeake Lodging is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Constellation Brands and Chesapeake Lodging

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

The idea behind Constellation Brands Class and Chesapeake Lodging Trust 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.