Correlation Between Constellation Brands and Grupo Simec

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

Diversification Opportunities for Constellation Brands and Grupo Simec

0.52

Correlation Coefficient

Constellation Brands  Grupo Simec

Very weak diversification

The 3 months correlation between Constellation and Grupo is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and Grupo Simec SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Simec SAB 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 Grupo Simec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Simec SAB has no effect on the direction of Constellation Brands i.e., Constellation Brands and Grupo Simec go up and down completely randomly.

Pair Corralation between Constellation Brands and Grupo Simec

Considering the 90-day investment horizon Constellation Brands is expected to generate 7.85 times less return on investment than Grupo Simec. But when comparing it to its historical volatility, Constellation Brands Class is 3.09 times less risky than Grupo Simec. It trades about 0.08 of its potential returns per unit of risk. Grupo Simec SAB is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,215  in Grupo Simec SAB on December 3, 2024 and sell it today you would earn a total of  393.00  from holding Grupo Simec SAB or generate 17.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Constellation Brands Class  vs.  Grupo Simec SAB

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.

Grupo Simec SAB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Simec SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Grupo Simec is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Constellation Brands and Grupo Simec

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

The idea behind Constellation Brands Class and Grupo Simec SAB 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.