Correlation Between Willamette Valley and Constellation Brands
Can any of the company-specific risk be diversified away by investing in both Willamette Valley and Constellation Brands 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 Willamette Valley and Constellation Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Willamette Valley Vineyards and Constellation Brands Class, you can compare the effects of market volatilities on Willamette Valley and Constellation Brands 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 Willamette Valley with a short position of Constellation Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willamette Valley and Constellation Brands.
Diversification Opportunities for Willamette Valley and Constellation Brands
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Willamette and Constellation is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Constellation Brands Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Brands and Willamette Valley 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 Willamette Valley Vineyards are associated (or correlated) with Constellation Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Brands has no effect on the direction of Willamette Valley i.e., Willamette Valley and Constellation Brands go up and down completely randomly.
Pair Corralation between Willamette Valley and Constellation Brands
Assuming the 90 days horizon Willamette Valley Vineyards is expected to generate 2.19 times more return on investment than Constellation Brands. However, Willamette Valley is 2.19 times more volatile than Constellation Brands Class. It trades about 0.1 of its potential returns per unit of risk. Constellation Brands Class is currently generating about 0.09 per unit of risk. If you would invest 357.00 in Willamette Valley Vineyards on August 27, 2024 and sell it today you would earn a total of 18.00 from holding Willamette Valley Vineyards or generate 5.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Willamette Valley Vineyards vs. Constellation Brands Class
Performance |
| Timeline |
| Willamette Valley |
| Constellation Brands |
Willamette Valley and Constellation Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Willamette Valley and Constellation Brands
The main advantage of trading using opposite Willamette Valley and Constellation Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley position performs unexpectedly, Constellation Brands 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 Constellation Brands will offset losses from the drop in Constellation Brands' long position.| Willamette Valley vs. Naked Wines plc | Willamette Valley vs. Pernod Ricard SA | Willamette Valley vs. Brown Forman | Willamette Valley vs. Treasury Wine Estates |
| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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