Correlation Between Coca-Cola FEMSA and COCA COLA

Can any of the company-specific risk be diversified away by investing in both Coca-Cola FEMSA and COCA COLA 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 COCA COLA 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 COCA A HBC, you can compare the effects of market volatilities on Coca-Cola FEMSA and COCA COLA 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 COCA COLA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca-Cola FEMSA and COCA COLA.

Diversification Opportunities for Coca-Cola FEMSA and COCA COLA

0.91

Correlation Coefficient

Coca-Cola FEMSA  COCA COLA

Almost no diversification

The 3 months correlation between Coca-Cola and COCA is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola FEMSA SAB and COCA A HBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A HBC 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 COCA COLA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A HBC has no effect on the direction of Coca-Cola FEMSA i.e., Coca-Cola FEMSA and COCA COLA go up and down completely randomly.

Pair Corralation between Coca-Cola FEMSA and COCA COLA

Assuming the 90 days trading horizon Coca-Cola FEMSA is expected to generate 1.86 times less return on investment than COCA COLA. But when comparing it to its historical volatility, Coca Cola FEMSA SAB is 1.02 times less risky than COCA COLA. It trades about 0.13 of its potential returns per unit of risk. COCA A HBC is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,260  in COCA A HBC on December 30, 2024 and sell it today you would earn a total of  880.00  from holding COCA A HBC or generate 26.99% return on investment over 90 days.

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

Coca Cola FEMSA SAB  vs.  COCA A HBC

Coca Cola FEMSA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola FEMSA SAB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Coca-Cola FEMSA reported solid returns over the last few months and may actually be approaching a breakup point.

COCA A HBC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in COCA A HBC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, COCA COLA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coca-Cola FEMSA and COCA COLA

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

The idea behind Coca Cola FEMSA SAB and COCA A HBC 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.

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.