Correlation Between Molson Coors and CONSTELLATION

Can any of the company-specific risk be diversified away by investing in both Molson Coors and CONSTELLATION 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 Molson Coors and CONSTELLATION into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Molson Coors Brewing and CONSTELLATION BRANDS INC, you can compare the effects of market volatilities on Molson Coors and CONSTELLATION 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 Molson Coors with a short position of CONSTELLATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molson Coors and CONSTELLATION.

Diversification Opportunities for Molson Coors and CONSTELLATION

0.45

Correlation Coefficient

Molson Coors  CONSTELLATION

Very weak diversification

The 3 months correlation between Molson and CONSTELLATION is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Brewing and CONSTELLATION BRANDS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSTELLATION BRANDS INC and Molson Coors 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 Molson Coors Brewing are associated (or correlated) with CONSTELLATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSTELLATION BRANDS INC has no effect on the direction of Molson Coors i.e., Molson Coors and CONSTELLATION go up and down completely randomly.

Pair Corralation between Molson Coors and CONSTELLATION

Considering the 90-day investment horizon Molson Coors Brewing is expected to generate 4.21 times more return on investment than CONSTELLATION. However, Molson Coors is 4.21 times more volatile than CONSTELLATION BRANDS INC. It trades about 0.04 of its potential returns per unit of risk. CONSTELLATION BRANDS INC is currently generating about 0.01 per unit of risk. If you would invest  5,231  in Molson Coors Brewing on October 26, 2024 and sell it today you would earn a total of  288.50  from holding Molson Coors Brewing or generate 5.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Molson Coors Brewing  vs.  CONSTELLATION BRANDS INC

Molson Coors Brewing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Molson Coors Brewing has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Molson Coors is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

CONSTELLATION BRANDS INC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Molson Coors and CONSTELLATION

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

The idea behind Molson Coors Brewing and CONSTELLATION BRANDS INC 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.