Correlation Between Constellation Brands and Philip Morris

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Can any of the company-specific risk be diversified away by investing in both Constellation Brands and Philip Morris 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 Philip Morris 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 Philip Morris International, you can compare the effects of market volatilities on Constellation Brands and Philip Morris 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 Philip Morris. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and Philip Morris.

Diversification Opportunities for Constellation Brands and Philip Morris

ConstellationPhilipDiversified AwayConstellationPhilipDiversified Away100%
-0.46
  Correlation Coefficient

Very good diversification

The 3 months correlation between Constellation and Philip is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and Philip Morris International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philip Morris Intern 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 Philip Morris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philip Morris Intern has no effect on the direction of Constellation Brands i.e., Constellation Brands and Philip Morris go up and down completely randomly.

Pair Corralation between Constellation Brands and Philip Morris

Considering the 90-day investment horizon Constellation Brands Class is expected to under-perform the Philip Morris. In addition to that, Constellation Brands is 1.15 times more volatile than Philip Morris International. It trades about -0.02 of its total potential returns per unit of risk. Philip Morris International is currently generating about 0.1 per unit of volatility. If you would invest  9,010  in Philip Morris International on November 27, 2024 and sell it today you would earn a total of  6,430  from holding Philip Morris International or generate 71.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Constellation Brands Class  vs.  Philip Morris International

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -30-20-10010
JavaScript chart by amCharts 3.21.15STZ PM
       Timeline  
Constellation Brands 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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 March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb160170180190200210220230240
Philip Morris Intern 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Philip Morris displayed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb120125130135140145150155

Constellation Brands and Philip Morris Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.39-3.29-2.19-1.080.00.931.882.833.78 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15STZ PM
       Returns  

Pair Trading with Constellation Brands and Philip Morris

The main advantage of trading using opposite Constellation Brands and Philip Morris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands position performs unexpectedly, Philip Morris 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 Philip Morris will offset losses from the drop in Philip Morris' long position.
The idea behind Constellation Brands Class and Philip Morris International 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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