Correlation Between Constellation Brands and Glory Star

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

Diversification Opportunities for Constellation Brands and Glory Star

0.02

Correlation Coefficient

Constellation Brands  Glory Star

Significant diversification

The 3 months correlation between Constellation and Glory is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and Glory Star New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glory Star New 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 Glory Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glory Star New has no effect on the direction of Constellation Brands i.e., Constellation Brands and Glory Star go up and down completely randomly.

Pair Corralation between Constellation Brands and Glory Star

Considering the 90-day investment horizon Constellation Brands Class is expected to under-perform the Glory Star. But the stock apears to be less risky and, when comparing its historical volatility, Constellation Brands Class is 17.95 times less risky than Glory Star. The stock trades about -0.1 of its potential returns per unit of risk. The Glory Star New is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.40  in Glory Star New on February 8, 2024 and sell it today you would lose (0.02) from holding Glory Star New or give up 5.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	73.91%
Values	Daily Returns

Constellation Brands Class  vs.  Glory Star New

Constellation Brands

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Brands Class are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Constellation Brands may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Glory Star New

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Glory Star New are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Glory Star showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Constellation Brands and Glory Star

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

The idea behind Constellation Brands Class and Glory Star New 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.