Correlation Between Fomento Economico and Lifeway Foods
Can any of the company-specific risk be diversified away by investing in both Fomento Economico 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 Fomento Economico and Lifeway Foods 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 Lifeway Foods, you can compare the effects of market volatilities on Fomento Economico 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 Fomento Economico with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fomento Economico and Lifeway Foods.
Diversification Opportunities for Fomento Economico and Lifeway Foods
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fomento and Lifeway is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods 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 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 Fomento Economico i.e., Fomento Economico and Lifeway Foods go up and down completely randomly.
Pair Corralation between Fomento Economico and Lifeway Foods
Considering the 90-day investment horizon Fomento Economico Mexicano is expected to under-perform the Lifeway Foods. But the stock apears to be less risky and, when comparing its historical volatility, Fomento Economico Mexicano is 2.95 times less risky than Lifeway Foods. The stock trades about -0.45 of its potential returns per unit of risk. The Lifeway Foods is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 2,655 in Lifeway Foods on August 24, 2024 and sell it today you would lose (237.00) from holding Lifeway Foods or give up 8.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fomento Economico Mexicano vs. Lifeway Foods
Performance |
| Timeline |
| Fomento Economico |
| Lifeway Foods |
Fomento Economico and Lifeway Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fomento Economico and Lifeway Foods
The main advantage of trading using opposite Fomento Economico and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fomento Economico 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.| Fomento Economico vs. Ambev SA ADR | Fomento Economico vs. Boston Beer | Fomento Economico vs. Carlsberg AS | Fomento Economico vs. Molson Coors Brewing |
| Lifeway Foods vs. Bellring Brands LLC | Lifeway Foods vs. Treehouse Foods | Lifeway Foods vs. Ingredion Incorporated | Lifeway Foods vs. JM Smucker |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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