Correlation Between Coca-Cola FEMSA and Hill Street

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

Diversification Opportunities for Coca-Cola FEMSA and Hill Street

-0.49

Correlation Coefficient

Coca-Cola FEMSA  Hill Street

Very good diversification

The 3 months correlation between Coca-Cola and Hill is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola FEMSA SAB and Hill Street Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hill Street Beverage 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 Hill Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hill Street Beverage has no effect on the direction of Coca-Cola FEMSA i.e., Coca-Cola FEMSA and Hill Street go up and down completely randomly.

Pair Corralation between Coca-Cola FEMSA and Hill Street

Assuming the 90 days horizon Coca-Cola FEMSA is expected to generate 1.64 times less return on investment than Hill Street. But when comparing it to its historical volatility, Coca Cola FEMSA SAB is 1.48 times less risky than Hill Street. It trades about 0.02 of its potential returns per unit of risk. Hill Street Beverage is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  32.00  in Hill Street Beverage on October 6, 2024 and sell it today you would lose (2.00) from holding Hill Street Beverage or give up 6.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.57%
Values	Daily Returns

Coca Cola FEMSA SAB  vs.  Hill Street Beverage

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Hill Street Beverage

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hill Street Beverage are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Hill Street reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coca-Cola FEMSA and Hill Street

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

The idea behind Coca Cola FEMSA SAB and Hill Street Beverage 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.