Correlation Between Constellation Brands and CVS Health
Can any of the company-specific risk be diversified away by investing in both Constellation Brands and CVS Health 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 CVS Health 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 CVS Health Corp, you can compare the effects of market volatilities on Constellation Brands and CVS Health 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 CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and CVS Health.
Diversification Opportunities for Constellation Brands and CVS Health
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Constellation and CVS is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of Constellation Brands i.e., Constellation Brands and CVS Health go up and down completely randomly.
Pair Corralation between Constellation Brands and CVS Health
Considering the 90-day investment horizon Constellation Brands Class is expected to generate 0.73 times more return on investment than CVS Health. However, Constellation Brands Class is 1.36 times less risky than CVS Health. It trades about 0.03 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.06 per unit of risk. If you would invest 25,304 in Constellation Brands Class on January 19, 2024 and sell it today you would earn a total of 427.00 from holding Constellation Brands Class or generate 1.69% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.41% |
Values | Daily Returns |
Constellation Brands Class vs. CVS Health Corp
Performance |
Timeline |
Constellation Brands |
CVS Health Corp |
Constellation Brands and CVS Health Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Constellation Brands and CVS Health
The main advantage of trading using opposite Constellation Brands and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.Constellation Brands vs. Brown Forman | Constellation Brands vs. Duckhorn Portfolio | Constellation Brands vs. MGP Ingredients | Constellation Brands vs. Brown Forman |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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