Correlation Between Drinks Americas and Fomento Economico

Can any of the company-specific risk be diversified away by investing in both Drinks Americas 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 Drinks Americas and Fomento Economico into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Drinks Americas Hldg and Fomento Economico Mexicano, you can compare the effects of market volatilities on Drinks Americas 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 Drinks Americas with a short position of Fomento Economico. Check out your portfolio center. Please also check ongoing floating volatility patterns of Drinks Americas and Fomento Economico.

Diversification Opportunities for Drinks Americas and Fomento Economico

0.0

Correlation Coefficient

Drinks Americas  Fomento Economico

Pay attention - limited upside

The 3 months correlation between Drinks and Fomento is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Drinks Americas Hldg and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and Drinks Americas 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 Drinks Americas Hldg 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 Drinks Americas i.e., Drinks Americas and Fomento Economico go up and down completely randomly.

Pair Corralation between Drinks Americas and Fomento Economico

If you would invest  0.01  in Drinks Americas Hldg on February 3, 2024 and sell it today you would earn a total of  0.00  from holding Drinks Americas Hldg or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Drinks Americas Hldg  vs.  Fomento Economico Mexicano

Drinks Americas Hldg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Drinks Americas Hldg has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Fomento Economico

Risk-Adjusted Performance

0 of 100

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 June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Drinks Americas and Fomento Economico

The main advantage of trading using opposite Drinks Americas and Fomento Economico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Drinks Americas 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.

The idea behind Drinks Americas Hldg and Fomento Economico Mexicano 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.