Correlation Between Constellation Brands and BW Offshore
Can any of the company-specific risk be diversified away by investing in both Constellation Brands and BW Offshore 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 BW Offshore 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 BW Offshore Limited, you can compare the effects of market volatilities on Constellation Brands and BW Offshore 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 BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and BW Offshore.
Diversification Opportunities for Constellation Brands and BW Offshore
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Constellation and BWOFY is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and BW Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore Limited 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 BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore Limited has no effect on the direction of Constellation Brands i.e., Constellation Brands and BW Offshore go up and down completely randomly.
Pair Corralation between Constellation Brands and BW Offshore
Considering the 90-day investment horizon Constellation Brands Class is expected to under-perform the BW Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Constellation Brands Class is 1.13 times less risky than BW Offshore. The stock trades about -0.01 of its potential returns per unit of risk. The BW Offshore Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 412.00 in BW Offshore Limited on September 12, 2024 and sell it today you would earn a total of 143.00 from holding BW Offshore Limited or generate 34.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.72% |
| Values | Daily Returns |
Constellation Brands Class vs. BW Offshore Limited
Performance |
| Timeline |
| Constellation Brands |
| BW Offshore Limited |
Constellation Brands and BW Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellation Brands and BW Offshore
The main advantage of trading using opposite Constellation Brands and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands position performs unexpectedly, BW Offshore 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 BW Offshore will offset losses from the drop in BW Offshore's long position.| Constellation Brands vs. Brown Forman | Constellation Brands vs. Duckhorn Portfolio | Constellation Brands vs. MGP Ingredients | Constellation Brands vs. Brown Forman |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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