Correlation Between CONSTELLATION and Gfl Environmental

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

Diversification Opportunities for CONSTELLATION and Gfl Environmental

-0.55

Correlation Coefficient

CONSTELLATION  Gfl Environmental

Excellent diversification

The 3 months correlation between CONSTELLATION and Gfl is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding CONSTELLATION BRANDS INC and Gfl Environmental Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gfl Environmental 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 Gfl Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gfl Environmental has no effect on the direction of CONSTELLATION i.e., CONSTELLATION and Gfl Environmental go up and down completely randomly.

Pair Corralation between CONSTELLATION and Gfl Environmental

Assuming the 90 days trading horizon CONSTELLATION BRANDS INC is expected to generate 2.2 times more return on investment than Gfl Environmental. However, CONSTELLATION is 2.2 times more volatile than Gfl Environmental Holdings. It trades about 0.03 of its potential returns per unit of risk. Gfl Environmental Holdings is currently generating about -0.2 per unit of risk. If you would invest  9,677  in CONSTELLATION BRANDS INC on October 6, 2024 and sell it today you would earn a total of  80.00  from holding CONSTELLATION BRANDS INC or generate 0.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.0%
Values	Daily Returns

CONSTELLATION BRANDS INC  vs.  Gfl Environmental Holdings

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.

Gfl Environmental

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gfl Environmental Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Gfl Environmental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CONSTELLATION and Gfl Environmental

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

The idea behind CONSTELLATION BRANDS INC and Gfl Environmental Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.