Correlation Between Fomento Economico and Suntory Beverage

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Can any of the company-specific risk be diversified away by investing in both Fomento Economico and Suntory Beverage 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 Suntory Beverage 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 Suntory Beverage Food, you can compare the effects of market volatilities on Fomento Economico and Suntory Beverage 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 Suntory Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fomento Economico and Suntory Beverage.

Diversification Opportunities for Fomento Economico and Suntory Beverage

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Fomento and Suntory is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and Suntory Beverage Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suntory Beverage Food 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 Suntory Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suntory Beverage Food has no effect on the direction of Fomento Economico i.e., Fomento Economico and Suntory Beverage go up and down completely randomly.

Pair Corralation between Fomento Economico and Suntory Beverage

Considering the 90-day investment horizon Fomento Economico Mexicano is expected to under-perform the Suntory Beverage. But the stock apears to be less risky and, when comparing its historical volatility, Fomento Economico Mexicano is 1.07 times less risky than Suntory Beverage. The stock trades about -0.45 of its potential returns per unit of risk. The Suntory Beverage Food is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  1,692  in Suntory Beverage Food on August 24, 2024 and sell it today you would lose (69.00) from holding Suntory Beverage Food or give up 4.08% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

Fomento Economico Mexicano  vs.  Suntory Beverage Food

 Performance 
       Timeline  
Fomento Economico 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fomento Economico Mexicano has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
Suntory Beverage Food 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Suntory Beverage Food has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Fomento Economico and Suntory Beverage Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fomento Economico and Suntory Beverage

The main advantage of trading using opposite Fomento Economico and Suntory Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fomento Economico position performs unexpectedly, Suntory Beverage 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 Suntory Beverage will offset losses from the drop in Suntory Beverage's long position.
The idea behind Fomento Economico Mexicano and Suntory Beverage Food pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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