Correlation Between CONSTELLATION and Destination

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

Diversification Opportunities for CONSTELLATION and Destination

0.0

Correlation Coefficient

CONSTELLATION  Destination

Pay attention - limited upside

The 3 months correlation between CONSTELLATION and Destination is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CONSTELLATION BRANDS INC and Destination XL Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destination XL Group 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 Destination. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destination XL Group has no effect on the direction of CONSTELLATION i.e., CONSTELLATION and Destination go up and down completely randomly.

Pair Corralation between CONSTELLATION and Destination

Assuming the 90 days trading horizon CONSTELLATION is expected to generate 1.09 times less return on investment than Destination. But when comparing it to its historical volatility, CONSTELLATION BRANDS INC is 1.61 times less risky than Destination. It trades about 0.19 of its potential returns per unit of risk. Destination XL Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  261.00  in Destination XL Group on October 22, 2024 and sell it today you would earn a total of  15.00  from holding Destination XL Group or generate 5.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	77.78%
Values	Daily Returns

CONSTELLATION BRANDS INC  vs.  Destination XL Group

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.

Destination XL Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Destination XL Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Destination is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CONSTELLATION and Destination

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

The idea behind CONSTELLATION BRANDS INC and Destination XL Group 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.