Correlation Between Constellation Brands and Real Good

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

Diversification Opportunities for Constellation Brands and Real Good

0.5

Correlation Coefficient

Constellation Brands  Real Good

Very weak diversification

The 3 months correlation between Constellation and Real is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and Real Good Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Good Food 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 Real Good. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Good Food has no effect on the direction of Constellation Brands i.e., Constellation Brands and Real Good go up and down completely randomly.

Pair Corralation between Constellation Brands and Real Good

Considering the 90-day investment horizon Constellation Brands Class is expected to under-perform the Real Good. But the stock apears to be less risky and, when comparing its historical volatility, Constellation Brands Class is 51.53 times less risky than Real Good. The stock trades about -0.13 of its potential returns per unit of risk. The Real Good Food is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  282.00  in Real Good Food on December 23, 2024 and sell it today you would lose (268.00) from holding Real Good Food or give up 95.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	26.23%
Values	Daily Returns

Constellation Brands Class  vs.  Real Good Food

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.

Real Good Food

Risk-Adjusted Performance

OK

Over the last 90 days Real Good Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak technical and fundamental indicators, Real Good reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Constellation Brands and Real Good

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

The idea behind Constellation Brands Class and Real Good Food 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.