Correlation Between Constellation Software and Constellation Brands

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

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

Diversification Opportunities for Constellation Software and Constellation Brands

0.0

Correlation Coefficient

Constellation Software  Constellation Brands

Pay attention - limited upside

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

Pair Corralation between Constellation Software and Constellation Brands

If you would invest (100.00) in Constellation Software on October 7, 2024 and sell it today you would earn a total of  100.00  from holding Constellation Software or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Constellation Software  vs.  Constellation Brands

Constellation Software

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Constellation Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Constellation Software is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Constellation Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellation Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Constellation Brands 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 Software and Constellation Brands

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

The idea behind Constellation Software and Constellation Brands 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.