Correlation Between Constellation Brands and Westrock Coffee

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

Diversification Opportunities for Constellation Brands and Westrock Coffee

0.58

Correlation Coefficient

Constellation Brands  Westrock Coffee

Very weak diversification

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

Pair Corralation between Constellation Brands and Westrock Coffee

Considering the 90-day investment horizon Constellation Brands Class is expected to under-perform the Westrock Coffee. But the stock apears to be less risky and, when comparing its historical volatility, Constellation Brands Class is 1.43 times less risky than Westrock Coffee. The stock trades about -0.17 of its potential returns per unit of risk. The Westrock Coffee is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  698.00  in Westrock Coffee on October 26, 2024 and sell it today you would lose (31.00) from holding Westrock Coffee or give up 4.44% of portfolio value over 90 days.

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

Constellation Brands Class  vs.  Westrock Coffee

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Westrock Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westrock Coffee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Westrock Coffee is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Constellation Brands and Westrock Coffee

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

The idea behind Constellation Brands Class and Westrock Coffee 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.