Correlation Between Constellation Brands and Town Sports

Can any of the company-specific risk be diversified away by investing in both Constellation Brands and Town Sports 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 Town Sports 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 Town Sports International, you can compare the effects of market volatilities on Constellation Brands and Town Sports 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 Town Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and Town Sports.

Diversification Opportunities for Constellation Brands and Town Sports

0.0

Correlation Coefficient

Constellation Brands  Town Sports

Pay attention - limited upside

The 3 months correlation between Constellation and Town is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and Town Sports International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Town Sports International 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 Town Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Town Sports International has no effect on the direction of Constellation Brands i.e., Constellation Brands and Town Sports go up and down completely randomly.

Pair Corralation between Constellation Brands and Town Sports

If you would invest  23,657  in Constellation Brands Class on February 21, 2024 and sell it today you would earn a total of  1,399  from holding Constellation Brands Class or generate 5.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Constellation Brands Class  vs.  Town Sports International

Constellation Brands

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Brands Class are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Constellation Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Town Sports International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Town Sports International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Town Sports is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Constellation Brands and Town Sports

The main advantage of trading using opposite Constellation Brands and Town Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands position performs unexpectedly, Town Sports 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 Town Sports will offset losses from the drop in Town Sports' long position.

The idea behind Constellation Brands Class and Town Sports International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.