Correlation Between Coca Cola and Fomento Economico
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Fomento Economico 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 Coca Cola and Fomento Economico into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coca Cola Femsa SAB and Fomento Economico Mexicano, you can compare the effects of market volatilities on Coca Cola and Fomento Economico 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 Coca Cola with a short position of Fomento Economico. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Fomento Economico.
Diversification Opportunities for Coca Cola and Fomento Economico
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coca and Fomento is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Femsa SAB and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and Coca Cola 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 Coca Cola Femsa SAB are associated (or correlated) with Fomento Economico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fomento Economico has no effect on the direction of Coca Cola i.e., Coca Cola and Fomento Economico go up and down completely randomly.
Pair Corralation between Coca Cola and Fomento Economico
Considering the 90-day investment horizon Coca Cola Femsa SAB is expected to generate 0.95 times more return on investment than Fomento Economico. However, Coca Cola Femsa SAB is 1.05 times less risky than Fomento Economico. It trades about 0.04 of its potential returns per unit of risk. Fomento Economico Mexicano is currently generating about 0.03 per unit of risk. If you would invest 6,380 in Coca Cola Femsa SAB on August 27, 2024 and sell it today you would earn a total of 1,526 from holding Coca Cola Femsa SAB or generate 23.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coca Cola Femsa SAB vs. Fomento Economico Mexicano
Performance |
| Timeline |
| Coca Cola Femsa |
| Fomento Economico |
Coca Cola and Fomento Economico Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Fomento Economico
The main advantage of trading using opposite Coca Cola and Fomento Economico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Fomento Economico 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 Fomento Economico will offset losses from the drop in Fomento Economico's long position.| Coca Cola vs. Fomento Economico Mexicano | Coca Cola vs. Grupo Televisa SAB | Coca Cola vs. Grupo Aeroportuario del | Coca Cola vs. Grupo Aeroportuario del |
| Fomento Economico vs. Ambev SA ADR | Fomento Economico vs. Boston Beer | Fomento Economico vs. Carlsberg AS | Fomento Economico 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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