Correlation Between Fomento Economico and Vodka Brands
Can any of the company-specific risk be diversified away by investing in both Fomento Economico and Vodka Brands 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 Vodka Brands 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 Vodka Brands Corp, you can compare the effects of market volatilities on Fomento Economico and Vodka Brands 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 Vodka Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fomento Economico and Vodka Brands.
Diversification Opportunities for Fomento Economico and Vodka Brands
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fomento and Vodka is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and Vodka Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodka Brands Corp 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 Vodka Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodka Brands Corp has no effect on the direction of Fomento Economico i.e., Fomento Economico and Vodka Brands go up and down completely randomly.
Pair Corralation between Fomento Economico and Vodka Brands
Considering the 90-day investment horizon Fomento Economico is expected to generate 20.48 times less return on investment than Vodka Brands. But when comparing it to its historical volatility, Fomento Economico Mexicano is 5.41 times less risky than Vodka Brands. It trades about 0.01 of its potential returns per unit of risk. Vodka Brands Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 140.00 in Vodka Brands Corp on November 27, 2024 and sell it today you would lose (19.00) from holding Vodka Brands Corp or give up 13.57% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 99.16% |
Values | Daily Returns |
Fomento Economico Mexicano vs. Vodka Brands Corp
Performance |
Timeline |
Fomento Economico |
Vodka Brands Corp |
Fomento Economico and Vodka Brands Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fomento Economico and Vodka Brands
The main advantage of trading using opposite Fomento Economico and Vodka Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fomento Economico position performs unexpectedly, Vodka Brands 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 Vodka Brands will offset losses from the drop in Vodka Brands' long position.Fomento Economico vs. Ambev SA ADR | ||
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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