Correlation Between United States and Constellation Brands

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

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

Diversification Opportunities for United States and Constellation Brands

0.34

Correlation Coefficient

United States  Constellation Brands

Weak diversification

The 3 months correlation between United and Constellation is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Constellation Brands Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Brands and United States 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 United States Steel 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 United States i.e., United States and Constellation Brands go up and down completely randomly.

Pair Corralation between United States and Constellation Brands

Taking into account the 90-day investment horizon United States Steel is expected to generate 2.27 times more return on investment than Constellation Brands. However, United States is 2.27 times more volatile than Constellation Brands Class. It trades about 0.03 of its potential returns per unit of risk. Constellation Brands Class is currently generating about -0.02 per unit of risk. If you would invest  2,800  in United States Steel on October 21, 2024 and sell it today you would earn a total of  804.00  from holding United States Steel or generate 28.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

United States Steel  vs.  Constellation Brands Class

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, United States is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Constellation Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellation Brands Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with United States and Constellation Brands

The main advantage of trading using opposite United States and Constellation Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel and Constellation Brands Class 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.