Correlation Between Constellation Brands and United Natural

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

Diversification Opportunities for Constellation Brands and United Natural

-0.58

Correlation Coefficient

Constellation Brands  United Natural

Excellent diversification

The 3 months correlation between Constellation and United is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and United Natural Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Natural Foods 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 United Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Natural Foods has no effect on the direction of Constellation Brands i.e., Constellation Brands and United Natural go up and down completely randomly.

Pair Corralation between Constellation Brands and United Natural

Considering the 90-day investment horizon Constellation Brands Class is expected to generate 0.31 times more return on investment than United Natural. However, Constellation Brands Class is 3.23 times less risky than United Natural. It trades about 0.01 of its potential returns per unit of risk. United Natural Foods is currently generating about 0.0 per unit of risk. If you would invest  21,425  in Constellation Brands Class on October 11, 2024 and sell it today you would earn a total of  503.00  from holding Constellation Brands Class or generate 2.35% return on investment over 90 days.

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

Constellation Brands Class  vs.  United Natural Foods

Constellation Brands

Risk-Adjusted Performance

0 of 100

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.

United Natural Foods

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, United Natural demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Constellation Brands and United Natural

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

The idea behind Constellation Brands Class and United Natural Foods 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.