Correlation Between CONSTELLATION and Grocery Outlet

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

Diversification Opportunities for CONSTELLATION and Grocery Outlet

0.44

Correlation Coefficient

CONSTELLATION  Grocery Outlet

Very weak diversification

The 3 months correlation between CONSTELLATION and Grocery is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CONSTELLATION BRANDS INC and Grocery Outlet Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grocery Outlet Holding 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 Grocery Outlet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grocery Outlet Holding has no effect on the direction of CONSTELLATION i.e., CONSTELLATION and Grocery Outlet go up and down completely randomly.

Pair Corralation between CONSTELLATION and Grocery Outlet

Assuming the 90 days trading horizon CONSTELLATION BRANDS INC is expected to generate 0.21 times more return on investment than Grocery Outlet. However, CONSTELLATION BRANDS INC is 4.84 times less risky than Grocery Outlet. It trades about 0.01 of its potential returns per unit of risk. Grocery Outlet Holding is currently generating about -0.04 per unit of risk. If you would invest  8,189  in CONSTELLATION BRANDS INC on October 26, 2024 and sell it today you would earn a total of  108.00  from holding CONSTELLATION BRANDS INC or generate 1.32% return on investment over 90 days.

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

CONSTELLATION BRANDS INC  vs.  Grocery Outlet Holding

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.

Grocery Outlet Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grocery Outlet Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Grocery Outlet is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CONSTELLATION and Grocery Outlet

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

The idea behind CONSTELLATION BRANDS INC and Grocery Outlet Holding 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.