Correlation Between CONSTELLATION and Chewy

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

Diversification Opportunities for CONSTELLATION and Chewy

-0.31

Correlation Coefficient

CONSTELLATION  Chewy

Very good diversification

The 3 months correlation between CONSTELLATION and Chewy is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding CONSTELLATION BRANDS INC and Chewy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chewy Inc 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 Chewy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chewy Inc has no effect on the direction of CONSTELLATION i.e., CONSTELLATION and Chewy go up and down completely randomly.

Pair Corralation between CONSTELLATION and Chewy

Assuming the 90 days trading horizon CONSTELLATION BRANDS INC is expected to under-perform the Chewy. But the bond apears to be less risky and, when comparing its historical volatility, CONSTELLATION BRANDS INC is 6.58 times less risky than Chewy. The bond trades about -0.01 of its potential returns per unit of risk. The Chewy Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,375  in Chewy Inc on October 3, 2024 and sell it today you would lose (954.00) from holding Chewy Inc or give up 21.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.79%
Values	Daily Returns

CONSTELLATION BRANDS INC  vs.  Chewy Inc

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 latest conflicting performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CONSTELLATION BRANDS INC investors.

Chewy Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chewy Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Chewy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CONSTELLATION and Chewy

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

The idea behind CONSTELLATION BRANDS INC and Chewy 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.