Correlation Between Constellation Brands and Forza Petroleum

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

Diversification Opportunities for Constellation Brands and Forza Petroleum

0.0

Correlation Coefficient

Constellation Brands  Forza Petroleum

Pay attention - limited upside

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

Pair Corralation between Constellation Brands and Forza Petroleum

If you would invest (100.00) in Forza Petroleum Limited on December 22, 2024 and sell it today you would earn a total of  100.00  from holding Forza Petroleum Limited or generate -100.0% 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.  Forza Petroleum Limited

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.

Forza Petroleum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forza Petroleum Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Forza Petroleum is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Constellation Brands and Forza Petroleum

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

The idea behind Constellation Brands Class and Forza Petroleum Limited 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.