Correlation Between Fomento Economico and Budweiser Brewing
Can any of the company-specific risk be diversified away by investing in both Fomento Economico and Budweiser Brewing 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 Fomento Economico and Budweiser Brewing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fomento Economico Mexicano and Budweiser Brewing, you can compare the effects of market volatilities on Fomento Economico and Budweiser Brewing 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 Fomento Economico with a short position of Budweiser Brewing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fomento Economico and Budweiser Brewing.
Diversification Opportunities for Fomento Economico and Budweiser Brewing
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fomento and Budweiser is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and Budweiser Brewing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Budweiser Brewing and Fomento Economico 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 Fomento Economico Mexicano are associated (or correlated) with Budweiser Brewing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Budweiser Brewing has no effect on the direction of Fomento Economico i.e., Fomento Economico and Budweiser Brewing go up and down completely randomly.
Pair Corralation between Fomento Economico and Budweiser Brewing
Considering the 90-day investment horizon Fomento Economico is expected to generate 1.52 times less return on investment than Budweiser Brewing. But when comparing it to its historical volatility, Fomento Economico Mexicano is 1.4 times less risky than Budweiser Brewing. It trades about 0.2 of its potential returns per unit of risk. Budweiser Brewing is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 89.00 in Budweiser Brewing on November 9, 2024 and sell it today you would earn a total of 10.00 from holding Budweiser Brewing or generate 11.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Fomento Economico Mexicano vs. Budweiser Brewing
Performance |
| Timeline |
| Fomento Economico |
| Budweiser Brewing |
Fomento Economico and Budweiser Brewing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fomento Economico and Budweiser Brewing
The main advantage of trading using opposite Fomento Economico and Budweiser Brewing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fomento Economico position performs unexpectedly, Budweiser Brewing 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 Budweiser Brewing will offset losses from the drop in Budweiser Brewing's long position.| Fomento Economico vs. Ambev SA ADR | Fomento Economico vs. Boston Beer | Fomento Economico vs. Carlsberg AS | Fomento Economico vs. Molson Coors Brewing |
| Budweiser Brewing vs. Anheuser Busch InBev SANV | Budweiser Brewing vs. Anheuser Busch Inbev | Budweiser Brewing vs. Molson Coors Brewing | Budweiser Brewing vs. Boston Beer |
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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