Correlation Between CONSTELLATION and Walmart

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

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

Diversification Opportunities for CONSTELLATION and Walmart

-0.3

Correlation Coefficient

CONSTELLATION  Walmart

Very good diversification

The 3 months correlation between CONSTELLATION and Walmart is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding CONSTELLATION BRANDS INC and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and CONSTELLATION 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 INC are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of CONSTELLATION i.e., CONSTELLATION and Walmart go up and down completely randomly.

Pair Corralation between CONSTELLATION and Walmart

Assuming the 90 days trading horizon CONSTELLATION BRANDS INC is expected to generate 0.45 times more return on investment than Walmart. However, CONSTELLATION BRANDS INC is 2.23 times less risky than Walmart. It trades about -0.12 of its potential returns per unit of risk. Walmart is currently generating about -0.15 per unit of risk. If you would invest  10,009  in CONSTELLATION BRANDS INC on October 5, 2024 and sell it today you would lose (131.00) from holding CONSTELLATION BRANDS INC or give up 1.31% of portfolio value over 90 days.

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

CONSTELLATION BRANDS INC  vs.  Walmart

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.

Walmart

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CONSTELLATION and Walmart

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

The idea behind CONSTELLATION BRANDS INC and Walmart 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.