Correlation Between Ambev SA and Fomento Economico
Can any of the company-specific risk be diversified away by investing in both Ambev SA and Fomento Economico 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 Ambev SA and Fomento Economico into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ambev SA ADR and Fomento Economico Mexicano, you can compare the effects of market volatilities on Ambev SA and Fomento Economico 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 Ambev SA with a short position of Fomento Economico. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and Fomento Economico.
Diversification Opportunities for Ambev SA and Fomento Economico
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ambev and Fomento is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and Ambev SA 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 Ambev SA ADR are associated (or correlated) with Fomento Economico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fomento Economico has no effect on the direction of Ambev SA i.e., Ambev SA and Fomento Economico go up and down completely randomly.
Pair Corralation between Ambev SA and Fomento Economico
Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the Fomento Economico. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA ADR is 1.01 times less risky than Fomento Economico. The stock trades about -0.02 of its potential returns per unit of risk. The Fomento Economico Mexicano is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 7,286 in Fomento Economico Mexicano on August 27, 2024 and sell it today you would earn a total of 1,428 from holding Fomento Economico Mexicano or generate 19.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ambev SA ADR vs. Fomento Economico Mexicano
Performance |
| Timeline |
| Ambev SA ADR |
| Fomento Economico |
Ambev SA and Fomento Economico Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ambev SA and Fomento Economico
The main advantage of trading using opposite Ambev SA and Fomento Economico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambev SA position performs unexpectedly, Fomento Economico 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 Fomento Economico will offset losses from the drop in Fomento Economico's long position.| Ambev SA vs. Fomento Economico Mexicano | Ambev SA vs. Boston Beer | Ambev SA vs. Carlsberg AS | Ambev SA vs. Compania Cervecerias Unidas |
| Fomento Economico vs. Ambev SA ADR | Fomento Economico vs. Boston Beer | Fomento Economico vs. Carlsberg AS | Fomento Economico vs. Molson Coors Brewing |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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