Correlation Between Coca-Cola FEMSA and Lifeway Foods
Can any of the company-specific risk be diversified away by investing in both Coca-Cola FEMSA and Lifeway Foods 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 Coca-Cola FEMSA and Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coca Cola FEMSA SAB and Lifeway Foods, you can compare the effects of market volatilities on Coca-Cola FEMSA and Lifeway Foods 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 Coca-Cola FEMSA with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca-Cola FEMSA and Lifeway Foods.
Diversification Opportunities for Coca-Cola FEMSA and Lifeway Foods
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Coca-Cola and Lifeway is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola FEMSA SAB and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Coca-Cola FEMSA 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 Coca Cola FEMSA SAB are associated (or correlated) with Lifeway Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeway Foods has no effect on the direction of Coca-Cola FEMSA i.e., Coca-Cola FEMSA and Lifeway Foods go up and down completely randomly.
Pair Corralation between Coca-Cola FEMSA and Lifeway Foods
Assuming the 90 days trading horizon Coca Cola FEMSA SAB is expected to generate 2.59 times more return on investment than Lifeway Foods. However, Coca-Cola FEMSA is 2.59 times more volatile than Lifeway Foods. It trades about 0.05 of its potential returns per unit of risk. Lifeway Foods is currently generating about 0.1 per unit of risk. If you would invest 431.00 in Coca Cola FEMSA SAB on September 12, 2024 and sell it today you would earn a total of 329.00 from holding Coca Cola FEMSA SAB or generate 76.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coca Cola FEMSA SAB vs. Lifeway Foods
Performance |
| Timeline |
| Coca Cola FEMSA |
| Lifeway Foods |
Coca-Cola FEMSA and Lifeway Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca-Cola FEMSA and Lifeway Foods
The main advantage of trading using opposite Coca-Cola FEMSA and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca-Cola FEMSA position performs unexpectedly, Lifeway Foods 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 Lifeway Foods will offset losses from the drop in Lifeway Foods' long position.| Coca-Cola FEMSA vs. AAC TECHNOLOGHLDGADR | Coca-Cola FEMSA vs. Citic Telecom International | Coca-Cola FEMSA vs. Consolidated Communications Holdings | Coca-Cola FEMSA vs. CITIC Telecom International |
| Lifeway Foods vs. Hormel Foods | Lifeway Foods vs. Superior Plus Corp | Lifeway Foods vs. SIVERS SEMICONDUCTORS AB | Lifeway Foods vs. NorAm Drilling AS |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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