Correlation Between Fomento Economico and PepsiCo
Can any of the company-specific risk be diversified away by investing in both Fomento Economico and PepsiCo 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 PepsiCo 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 PepsiCo, you can compare the effects of market volatilities on Fomento Economico and PepsiCo 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 PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fomento Economico and PepsiCo.
Diversification Opportunities for Fomento Economico and PepsiCo
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fomento and PepsiCo is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo 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 PepsiCo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PepsiCo has no effect on the direction of Fomento Economico i.e., Fomento Economico and PepsiCo go up and down completely randomly.
Pair Corralation between Fomento Economico and PepsiCo
Considering the 90-day investment horizon Fomento Economico Mexicano is expected to generate 1.63 times more return on investment than PepsiCo. However, Fomento Economico is 1.63 times more volatile than PepsiCo. It trades about 0.03 of its potential returns per unit of risk. PepsiCo is currently generating about -0.02 per unit of risk. If you would invest 7,569 in Fomento Economico Mexicano on September 19, 2024 and sell it today you would earn a total of 1,111 from holding Fomento Economico Mexicano or generate 14.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fomento Economico Mexicano vs. PepsiCo
Performance |
| Timeline |
| Fomento Economico |
| PepsiCo |
Fomento Economico and PepsiCo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fomento Economico and PepsiCo
The main advantage of trading using opposite Fomento Economico and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fomento Economico position performs unexpectedly, PepsiCo 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 PepsiCo will offset losses from the drop in PepsiCo'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 |
| PepsiCo vs. Coca Cola Consolidated | PepsiCo vs. Monster Beverage Corp | PepsiCo vs. Celsius Holdings | PepsiCo vs. Keurig Dr Pepper |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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