Correlation Between Constellation Brands and SFL
Can any of the company-specific risk be diversified away by investing in both Constellation Brands and SFL 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 SFL 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 SFL Corporation, you can compare the effects of market volatilities on Constellation Brands and SFL 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 SFL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and SFL.
Diversification Opportunities for Constellation Brands and SFL
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Constellation and SFL is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and SFL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFL Corporation 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 SFL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFL Corporation has no effect on the direction of Constellation Brands i.e., Constellation Brands and SFL go up and down completely randomly.
Pair Corralation between Constellation Brands and SFL
Considering the 90-day investment horizon Constellation Brands is expected to generate 1.43 times less return on investment than SFL. But when comparing it to its historical volatility, Constellation Brands Class is 1.31 times less risky than SFL. It trades about 0.01 of its potential returns per unit of risk. SFL Corporation is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,024 in SFL Corporation on September 4, 2024 and sell it today you would earn a total of 21.00 from holding SFL Corporation or generate 2.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Constellation Brands Class vs. SFL Corp.
Performance |
| Timeline |
| Constellation Brands |
| SFL Corporation |
Constellation Brands and SFL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellation Brands and SFL
The main advantage of trading using opposite Constellation Brands and SFL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands position performs unexpectedly, SFL 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 SFL will offset losses from the drop in SFL's long position.| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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