Correlation Between Fomento Economico and Compania Cervecerias
Can any of the company-specific risk be diversified away by investing in both Fomento Economico and Compania Cervecerias 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 Compania Cervecerias 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 Compania Cervecerias Unidas, you can compare the effects of market volatilities on Fomento Economico and Compania Cervecerias 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 Compania Cervecerias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fomento Economico and Compania Cervecerias.
Diversification Opportunities for Fomento Economico and Compania Cervecerias
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fomento and Compania is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias 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 Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of Fomento Economico i.e., Fomento Economico and Compania Cervecerias go up and down completely randomly.
Pair Corralation between Fomento Economico and Compania Cervecerias
Considering the 90-day investment horizon Fomento Economico Mexicano is expected to under-perform the Compania Cervecerias. But the stock apears to be less risky and, when comparing its historical volatility, Fomento Economico Mexicano is 1.14 times less risky than Compania Cervecerias. The stock trades about -0.11 of its potential returns per unit of risk. The Compania Cervecerias Unidas is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,146 in Compania Cervecerias Unidas on August 27, 2024 and sell it today you would lose (55.00) from holding Compania Cervecerias Unidas or give up 4.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fomento Economico Mexicano vs. Compania Cervecerias Unidas
Performance |
| Timeline |
| Fomento Economico |
| Compania Cervecerias |
Fomento Economico and Compania Cervecerias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fomento Economico and Compania Cervecerias
The main advantage of trading using opposite Fomento Economico and Compania Cervecerias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fomento Economico position performs unexpectedly, Compania Cervecerias 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 Compania Cervecerias will offset losses from the drop in Compania Cervecerias' long position.| Fomento Economico vs. Ambev SA ADR | Fomento Economico vs. Boston Beer | Fomento Economico vs. Carlsberg AS | Fomento Economico vs. Molson Coors Brewing |
| Compania Cervecerias vs. Boston Beer | Compania Cervecerias vs. Molson Coors Beverage | Compania Cervecerias vs. Ambev SA ADR | Compania Cervecerias 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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