Correlation Between Anheuser-Busch InBev and Fomento Econmico

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

By analyzing existing cross correlation between Anheuser Busch InBev SANV and Fomento Econmico Mexicano, you can compare the effects of market volatilities on Anheuser-Busch InBev and Fomento Econmico 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 Anheuser-Busch InBev with a short position of Fomento Econmico. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anheuser-Busch InBev and Fomento Econmico.

Diversification Opportunities for Anheuser-Busch InBev and Fomento Econmico

0.72

Correlation Coefficient

Anheuser-Busch InBev  Fomento Econmico

Poor diversification

The 3 months correlation between Anheuser-Busch and Fomento is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch InBev SANV and Fomento Econmico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Econmico Mexicano and Anheuser-Busch InBev 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 Anheuser Busch InBev SANV are associated (or correlated) with Fomento Econmico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fomento Econmico Mexicano has no effect on the direction of Anheuser-Busch InBev i.e., Anheuser-Busch InBev and Fomento Econmico go up and down completely randomly.

Pair Corralation between Anheuser-Busch InBev and Fomento Econmico

Assuming the 90 days trading horizon Anheuser Busch InBev SANV is expected to generate 0.84 times more return on investment than Fomento Econmico. However, Anheuser Busch InBev SANV is 1.19 times less risky than Fomento Econmico. It trades about -0.09 of its potential returns per unit of risk. Fomento Econmico Mexicano is currently generating about -0.08 per unit of risk. If you would invest  5,592  in Anheuser Busch InBev SANV on September 23, 2024 and sell it today you would lose (788.00) from holding Anheuser Busch InBev SANV or give up 14.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Anheuser Busch InBev SANV  vs.  Fomento Econmico Mexicano

Anheuser Busch InBev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch InBev SANV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Fomento Econmico Mexicano

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fomento Econmico Mexicano has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Fomento Econmico is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Anheuser-Busch InBev and Fomento Econmico

The main advantage of trading using opposite Anheuser-Busch InBev and Fomento Econmico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anheuser-Busch InBev position performs unexpectedly, Fomento Econmico 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 Econmico will offset losses from the drop in Fomento Econmico's long position.

The idea behind Anheuser Busch InBev SANV and Fomento Econmico 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.