Correlation Between Constellation Brands and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Constellation Brands and Scandinavian Tobacco 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 Scandinavian Tobacco 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 Scandinavian Tobacco Group, you can compare the effects of market volatilities on Constellation Brands and Scandinavian Tobacco 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 Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and Scandinavian Tobacco.
Diversification Opportunities for Constellation Brands and Scandinavian Tobacco
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Constellation and Scandinavian is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco 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 Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of Constellation Brands i.e., Constellation Brands and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Constellation Brands and Scandinavian Tobacco
Considering the 90-day investment horizon Constellation Brands Class is expected to generate 0.87 times more return on investment than Scandinavian Tobacco. However, Constellation Brands Class is 1.15 times less risky than Scandinavian Tobacco. It trades about 0.01 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.02 per unit of risk. If you would invest 24,119 in Constellation Brands Class on August 28, 2024 and sell it today you would earn a total of 48.00 from holding Constellation Brands Class or generate 0.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.52% |
| Values | Daily Returns |
Constellation Brands Class vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Constellation Brands |
| Scandinavian Tobacco |
Constellation Brands and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellation Brands and Scandinavian Tobacco
The main advantage of trading using opposite Constellation Brands and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands position performs unexpectedly, Scandinavian Tobacco 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 Scandinavian Tobacco will offset losses from the drop in Scandinavian Tobacco's long position.| Constellation Brands vs. Brown Forman | Constellation Brands vs. Duckhorn Portfolio | Constellation Brands vs. MGP Ingredients | Constellation Brands vs. Brown Forman |
| Scandinavian Tobacco vs. Imperial Brands PLC | Scandinavian Tobacco vs. RLX Technology | Scandinavian Tobacco vs. British American Tobacco | Scandinavian Tobacco vs. Turning Point Brands |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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