Correlation Between Coca Cola and Constellation Brands
Can any of the company-specific risk be diversified away by investing in both Coca Cola 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 Coca Cola and Constellation Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coca Cola Femsa SAB and Constellation Brands Class, you can compare the effects of market volatilities on Coca Cola 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 Coca Cola with a short position of Constellation Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Constellation Brands.
Diversification Opportunities for Coca Cola and Constellation Brands
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Coca and Constellation is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Femsa SAB and Constellation Brands Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Brands and Coca Cola 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 Coca Cola Femsa SAB 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 Coca Cola i.e., Coca Cola and Constellation Brands go up and down completely randomly.
Pair Corralation between Coca Cola and Constellation Brands
Considering the 90-day investment horizon Coca Cola Femsa SAB is expected to generate 1.29 times more return on investment than Constellation Brands. However, Coca Cola is 1.29 times more volatile than Constellation Brands Class. It trades about 0.04 of its potential returns per unit of risk. Constellation Brands Class is currently generating about 0.03 per unit of risk. If you would invest 6,397 in Coca Cola Femsa SAB on August 28, 2024 and sell it today you would earn a total of 1,609 from holding Coca Cola Femsa SAB or generate 25.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coca Cola Femsa SAB vs. Constellation Brands Class
Performance |
| Timeline |
| Coca Cola Femsa |
| Constellation Brands |
Coca Cola and Constellation Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Constellation Brands
The main advantage of trading using opposite Coca Cola and Constellation Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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.| Coca Cola vs. Fomento Economico Mexicano | Coca Cola vs. Grupo Televisa SAB | Coca Cola vs. Grupo Aeroportuario del | Coca Cola vs. Grupo Aeroportuario del |
| Constellation Brands vs. Brown Forman | Constellation Brands vs. Duckhorn Portfolio | Constellation Brands vs. MGP Ingredients | Constellation Brands vs. Brown Forman |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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