Correlation Between Coca-Cola FEMSA and TESCO PLC

Can any of the company-specific risk be diversified away by investing in both Coca-Cola FEMSA and TESCO PLC 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 FEMSA and TESCO PLC 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 TESCO PLC LS 0633333, you can compare the effects of market volatilities on Coca-Cola FEMSA and TESCO PLC 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 FEMSA with a short position of TESCO PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca-Cola FEMSA and TESCO PLC.

Diversification Opportunities for Coca-Cola FEMSA and TESCO PLC

0.45

Correlation Coefficient

Coca-Cola FEMSA  TESCO PLC

Very weak diversification

The 3 months correlation between Coca-Cola and TESCO is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola FEMSA SAB and TESCO PLC LS 0633333 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TESCO PLC LS and Coca-Cola FEMSA 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 TESCO PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TESCO PLC LS has no effect on the direction of Coca-Cola FEMSA i.e., Coca-Cola FEMSA and TESCO PLC go up and down completely randomly.

Pair Corralation between Coca-Cola FEMSA and TESCO PLC

Assuming the 90 days trading horizon Coca Cola FEMSA SAB is expected to generate 2.62 times more return on investment than TESCO PLC. However, Coca-Cola FEMSA is 2.62 times more volatile than TESCO PLC LS 0633333. It trades about 0.08 of its potential returns per unit of risk. TESCO PLC LS 0633333 is currently generating about 0.05 per unit of risk. If you would invest  725.00  in Coca Cola FEMSA SAB on November 29, 2024 and sell it today you would earn a total of  100.00  from holding Coca Cola FEMSA SAB or generate 13.79% return on investment over 90 days.

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

Coca Cola FEMSA SAB  vs.  TESCO PLC LS 0633333

Coca Cola FEMSA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola FEMSA SAB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Coca-Cola FEMSA reported solid returns over the last few months and may actually be approaching a breakup point.

TESCO PLC LS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TESCO PLC LS 0633333 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, TESCO PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Coca-Cola FEMSA and TESCO PLC

The main advantage of trading using opposite Coca-Cola FEMSA and TESCO PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca-Cola FEMSA position performs unexpectedly, TESCO PLC 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 TESCO PLC will offset losses from the drop in TESCO PLC's long position.

The idea behind Coca Cola FEMSA SAB and TESCO PLC LS 0633333 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.