Correlation Between Constellation Brands and ODDITY Tech

Can any of the company-specific risk be diversified away by investing in both Constellation Brands and ODDITY Tech 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 ODDITY Tech 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 ODDITY Tech Ltd, you can compare the effects of market volatilities on Constellation Brands and ODDITY Tech 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 ODDITY Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and ODDITY Tech.

Diversification Opportunities for Constellation Brands and ODDITY Tech

0.25

Correlation Coefficient

Constellation Brands  ODDITY Tech

Modest diversification

The 3 months correlation between Constellation and ODDITY is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and ODDITY Tech Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODDITY Tech 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 ODDITY Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODDITY Tech has no effect on the direction of Constellation Brands i.e., Constellation Brands and ODDITY Tech go up and down completely randomly.

Pair Corralation between Constellation Brands and ODDITY Tech

Considering the 90-day investment horizon Constellation Brands Class is expected to under-perform the ODDITY Tech. In addition to that, Constellation Brands is 1.02 times more volatile than ODDITY Tech Ltd. It trades about -0.18 of its total potential returns per unit of risk. ODDITY Tech Ltd is currently generating about -0.06 per unit of volatility. If you would invest  4,955  in ODDITY Tech Ltd on December 7, 2024 and sell it today you would lose (550.00) from holding ODDITY Tech Ltd or give up 11.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Constellation Brands Class  vs.  ODDITY Tech Ltd

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.

ODDITY Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days ODDITY Tech Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Constellation Brands and ODDITY Tech

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

The idea behind Constellation Brands Class and ODDITY Tech Ltd 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.