Correlation Between Constellation Brands and Code Green
Can any of the company-specific risk be diversified away by investing in both Constellation Brands and Code Green 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 Code Green 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 Code Green Apparel, you can compare the effects of market volatilities on Constellation Brands and Code Green 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 Code Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and Code Green.
Diversification Opportunities for Constellation Brands and Code Green
0.01 | Correlation Coefficient |
Significant diversification
The 24 months correlation between Constellation and Code is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and Code Green Apparel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Code Green Apparel 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 Code Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Code Green Apparel has no effect on the direction of Constellation Brands i.e., Constellation Brands and Code Green go up and down completely randomly.
Pair Corralation between Constellation Brands and Code Green
Considering the 90-day investment horizon Constellation Brands is expected to generate 7.75 times less return on investment than Code Green. But when comparing it to its historical volatility, Constellation Brands Class is 27.3 times less risky than Code Green. It trades about 0.14 of its potential returns per unit of risk. Code Green Apparel is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 0.09 in Code Green Apparel on January 27, 2024 and sell it today you would lose (0.06) from holding Code Green Apparel or give up 66.67% of portfolio value over 90 days.
| Time Period | 24 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Constellation Brands Class vs. Code Green Apparel
Performance |
| Timeline |
| Constellation Brands |
| Code Green Apparel |
Constellation Brands and Code Green Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellation Brands and Code Green
The main advantage of trading using opposite Constellation Brands and Code Green positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands position performs unexpectedly, Code Green 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 Code Green will offset losses from the drop in Code Green's long position.| Constellation Brands vs. Pernod Ricard SA | Constellation Brands vs. Vintage Wine Estates | Constellation Brands vs. Fresh Grapes LLC | Constellation Brands vs. Treasury Wine Estates |
| Code Green vs. Superior Uniform Group | Code Green vs. Lakeland Industries | Code Green vs. Jerash Holdings | Code Green vs. G III Apparel Group |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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