Correlation Between Constellation Brands and Corporacion America

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

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

Diversification Opportunities for Constellation Brands and Corporacion America

-0.59

Correlation Coefficient

Constellation Brands  Corporacion America

Excellent diversification

The 3 months correlation between Constellation and Corporacion is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and Corporacion America Airports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporacion America and Constellation Brands 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 Class are associated (or correlated) with Corporacion America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporacion America has no effect on the direction of Constellation Brands i.e., Constellation Brands and Corporacion America go up and down completely randomly.

Pair Corralation between Constellation Brands and Corporacion America

Considering the 90-day investment horizon Constellation Brands Class is expected to under-perform the Corporacion America. But the stock apears to be less risky and, when comparing its historical volatility, Constellation Brands Class is 1.65 times less risky than Corporacion America. The stock trades about -0.02 of its potential returns per unit of risk. The Corporacion America Airports is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,740  in Corporacion America Airports on September 12, 2024 and sell it today you would earn a total of  289.00  from holding Corporacion America Airports or generate 16.61% return on investment over 90 days.

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

Constellation Brands Class  vs.  Corporacion America Airports

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 fairly strong basic indicators, Constellation Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Corporacion America

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corporacion America Airports are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Corporacion America reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Constellation Brands and Corporacion America

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

The idea behind Constellation Brands Class and Corporacion America Airports 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..