Correlation Between Constellation Brands and KINDER

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

Diversification Opportunities for Constellation Brands and KINDER

0.56

Correlation Coefficient

Constellation Brands  KINDER

Very weak diversification

The 3 months correlation between Constellation and KINDER is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and KINDER MORGAN ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN ENERGY 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN ENERGY has no effect on the direction of Constellation Brands i.e., Constellation Brands and KINDER go up and down completely randomly.

Pair Corralation between Constellation Brands and KINDER

Considering the 90-day investment horizon Constellation Brands Class is expected to under-perform the KINDER. In addition to that, Constellation Brands is 1.3 times more volatile than KINDER MORGAN ENERGY. It trades about -0.11 of its total potential returns per unit of risk. KINDER MORGAN ENERGY is currently generating about -0.04 per unit of volatility. If you would invest  9,743  in KINDER MORGAN ENERGY on October 7, 2024 and sell it today you would lose (220.00) from holding KINDER MORGAN ENERGY or give up 2.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	88.89%
Values	Daily Returns

Constellation Brands Class  vs.  KINDER MORGAN ENERGY

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.

KINDER MORGAN ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KINDER MORGAN ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KINDER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Constellation Brands and KINDER

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

The idea behind Constellation Brands Class and KINDER MORGAN ENERGY 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.