Correlation Between Coca-Cola European and Coca-Cola FEMSA

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

Diversification Opportunities for Coca-Cola European and Coca-Cola FEMSA

-0.46

Correlation Coefficient

Coca-Cola European  Coca-Cola FEMSA

Very good diversification

The 3 months correlation between Coca-Cola and Coca-Cola is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola European Partners 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 Coca-Cola European 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 European Partners 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 Coca-Cola European i.e., Coca-Cola European and Coca-Cola FEMSA go up and down completely randomly.

Pair Corralation between Coca-Cola European and Coca-Cola FEMSA

Assuming the 90 days horizon Coca Cola European Partners is expected to generate 1.16 times more return on investment than Coca-Cola FEMSA. However, Coca-Cola European is 1.16 times more volatile than Coca Cola FEMSA SAB. It trades about 0.0 of its potential returns per unit of risk. Coca Cola FEMSA SAB is currently generating about -0.01 per unit of risk. If you would invest  7,225  in Coca Cola European Partners on September 5, 2024 and sell it today you would lose (35.00) from holding Coca Cola European Partners or give up 0.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Coca Cola European Partners  vs.  Coca Cola FEMSA SAB

Coca Cola European

Risk-Adjusted Performance

0 of 100

Very Weak

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

Coca Cola FEMSA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coca Cola FEMSA SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Coca-Cola FEMSA 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 European and Coca-Cola FEMSA

The main advantage of trading using opposite Coca-Cola European and Coca-Cola FEMSA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca-Cola European 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.

The idea behind Coca Cola European Partners and Coca Cola FEMSA SAB 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.