Correlation Between Fomento Economico and Anheuser Busch

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

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

Diversification Opportunities for Fomento Economico and Anheuser Busch

0.73

Correlation Coefficient

Fomento Economico  Anheuser Busch

Poor diversification

The 3 months correlation between Fomento and Anheuser is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and Anheuser Busch Inbev in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch Inbev and Fomento Economico 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 Fomento Economico Mexicano are associated (or correlated) with Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch Inbev has no effect on the direction of Fomento Economico i.e., Fomento Economico and Anheuser Busch go up and down completely randomly.

Pair Corralation between Fomento Economico and Anheuser Busch

Considering the 90-day investment horizon Fomento Economico Mexicano is expected to generate 1.26 times more return on investment than Anheuser Busch. However, Fomento Economico is 1.26 times more volatile than Anheuser Busch Inbev. It trades about 0.05 of its potential returns per unit of risk. Anheuser Busch Inbev is currently generating about 0.02 per unit of risk. If you would invest  8,487  in Fomento Economico Mexicano on November 27, 2024 and sell it today you would earn a total of  413.00  from holding Fomento Economico Mexicano or generate 4.87% return on investment over 90 days.

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

Fomento Economico Mexicano  vs.  Anheuser Busch Inbev

Fomento Economico

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fomento Economico Mexicano are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Fomento Economico is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Anheuser Busch Inbev

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anheuser Busch Inbev are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Anheuser Busch is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fomento Economico and Anheuser Busch

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

The idea behind Fomento Economico Mexicano and Anheuser Busch Inbev 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..