Correlation Between Constellation Brands and STRYKER

Can any of the company-specific risk be diversified away by investing in both Constellation Brands and STRYKER 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 STRYKER 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 STRYKER P 4375, you can compare the effects of market volatilities on Constellation Brands and STRYKER 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 STRYKER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and STRYKER.

Diversification Opportunities for Constellation Brands and STRYKER

0.03

Correlation Coefficient

Constellation Brands  STRYKER

Significant diversification

The 3 months correlation between Constellation and STRYKER is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and STRYKER P 4375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRYKER P 4375 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 STRYKER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRYKER P 4375 has no effect on the direction of Constellation Brands i.e., Constellation Brands and STRYKER go up and down completely randomly.

Pair Corralation between Constellation Brands and STRYKER

Considering the 90-day investment horizon Constellation Brands is expected to generate 967.32 times less return on investment than STRYKER. But when comparing it to its historical volatility, Constellation Brands Class is 95.31 times less risky than STRYKER. It trades about 0.01 of its potential returns per unit of risk. STRYKER P 4375 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9,099  in STRYKER P 4375 on October 11, 2024 and sell it today you would lose (93.00) from holding STRYKER P 4375 or give up 1.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	32.46%
Values	Daily Returns

Constellation Brands Class  vs.  STRYKER P 4375

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.

STRYKER P 4375

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in STRYKER P 4375 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, STRYKER 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 STRYKER

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

The idea behind Constellation Brands Class and STRYKER P 4375 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.