Correlation Between LG Electronics and Coca-Cola FEMSA
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Coca-Cola FEMSA 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 LG Electronics and Coca-Cola FEMSA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Coca Cola FEMSA SAB, you can compare the effects of market volatilities on LG Electronics and Coca-Cola FEMSA 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 LG Electronics with a short position of Coca-Cola FEMSA. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Coca-Cola FEMSA.
Diversification Opportunities for LG Electronics and Coca-Cola FEMSA
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LGLG and Coca-Cola is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Coca Cola FEMSA SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola FEMSA and LG Electronics 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 LG Electronics are associated (or correlated) with Coca-Cola FEMSA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola FEMSA has no effect on the direction of LG Electronics i.e., LG Electronics and Coca-Cola FEMSA go up and down completely randomly.
Pair Corralation between LG Electronics and Coca-Cola FEMSA
Assuming the 90 days trading horizon LG Electronics is expected to under-perform the Coca-Cola FEMSA. In addition to that, LG Electronics is 1.33 times more volatile than Coca Cola FEMSA SAB. It trades about -0.01 of its total potential returns per unit of risk. Coca Cola FEMSA SAB is currently generating about 0.04 per unit of volatility. If you would invest 6,452 in Coca Cola FEMSA SAB on November 30, 2024 and sell it today you would earn a total of 1,748 from holding Coca Cola FEMSA SAB or generate 27.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
LG Electronics vs. Coca Cola FEMSA SAB
Performance |
| Timeline |
| LG Electronics |
| Coca Cola FEMSA |
LG Electronics and Coca-Cola FEMSA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Coca-Cola FEMSA
The main advantage of trading using opposite LG Electronics and Coca-Cola FEMSA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Coca-Cola FEMSA 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 Coca-Cola FEMSA will offset losses from the drop in Coca-Cola FEMSA's long position.| LG Electronics vs. Hitachi Construction Machinery | LG Electronics vs. OAKTRSPECLENDNEW | LG Electronics vs. BANK OCHINA H | LG Electronics vs. Sterling Construction |
| Coca-Cola FEMSA vs. China Communications Construction | Coca-Cola FEMSA vs. CHINA EDUCATION GROUP | Coca-Cola FEMSA vs. Singapore Telecommunications Limited | Coca-Cola FEMSA vs. Casio Computer CoLtd |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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