Correlation Between Constellation Brands and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Constellation Brands and Naked Wines 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 Naked Wines 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 Naked Wines plc, you can compare the effects of market volatilities on Constellation Brands and Naked Wines 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 Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and Naked Wines.
Diversification Opportunities for Constellation Brands and Naked Wines
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Constellation and Naked is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines plc 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 Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of Constellation Brands i.e., Constellation Brands and Naked Wines go up and down completely randomly.
Pair Corralation between Constellation Brands and Naked Wines
Considering the 90-day investment horizon Constellation Brands Class is expected to generate 0.83 times more return on investment than Naked Wines. However, Constellation Brands Class is 1.21 times less risky than Naked Wines. It trades about -0.24 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.21 per unit of risk. If you would invest 22,705 in Constellation Brands Class on October 20, 2024 and sell it today you would lose (4,274) from holding Constellation Brands Class or give up 18.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Constellation Brands Class vs. Naked Wines plc
Performance |
| Timeline |
| Constellation Brands |
| Naked Wines plc |
Constellation Brands and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellation Brands and Naked Wines
The main advantage of trading using opposite Constellation Brands and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands position performs unexpectedly, Naked Wines 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 Naked Wines will offset losses from the drop in Naked Wines' long position.| Constellation Brands vs. Brown Forman | Constellation Brands vs. MGP Ingredients | Constellation Brands vs. Brown Forman | Constellation Brands vs. Diageo PLC ADR |
| Naked Wines vs. Pernod Ricard SA | Naked Wines vs. Naked Wines plc | Naked Wines vs. Crimson Wine | Naked Wines 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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