Correlation Between Vintage Wine and Constellation Brands

Can any of the company-specific risk be diversified away by investing in both Vintage Wine 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 Vintage Wine and Constellation Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vintage Wine Estates and Constellation Brands Class, you can compare the effects of market volatilities on Vintage Wine 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 Vintage Wine with a short position of Constellation Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vintage Wine and Constellation Brands.

Diversification Opportunities for Vintage Wine and Constellation Brands

0.68

Correlation Coefficient

Vintage Wine  Constellation Brands

Poor diversification

The 3 months correlation between Vintage and Constellation is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Vintage Wine Estates and Constellation Brands Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Brands and Vintage Wine 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 Vintage Wine Estates 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 Vintage Wine i.e., Vintage Wine and Constellation Brands go up and down completely randomly.

Pair Corralation between Vintage Wine and Constellation Brands

Assuming the 90 days horizon Vintage Wine Estates is expected to generate 34.18 times more return on investment than Constellation Brands. However, Vintage Wine is 34.18 times more volatile than Constellation Brands Class. It trades about 0.14 of its potential returns per unit of risk. Constellation Brands Class is currently generating about -0.12 per unit of risk. If you would invest  0.92  in Vintage Wine Estates on January 29, 2024 and sell it today you would earn a total of  0.08  from holding Vintage Wine Estates or generate 8.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	71.43%
Values	Daily Returns

Vintage Wine Estates  vs.  Constellation Brands Class

Vintage Wine Estates

Risk-Adjusted Performance

9 of 100

OK

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

Constellation Brands

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Brands Class are ranked lower than 5 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vintage Wine and Constellation Brands

The main advantage of trading using opposite Vintage Wine and Constellation Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vintage Wine 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.

The idea behind Vintage Wine Estates and Constellation Brands Class 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.