Correlation Between Heineken Holding and Fomento Economico

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

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

Diversification Opportunities for Heineken Holding and Fomento Economico

0.91

Correlation Coefficient

Heineken Holding  Fomento Economico

Almost no diversification

The 3 months correlation between Heineken and Fomento is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Heineken Holding NV and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and Heineken Holding 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 Heineken Holding NV are associated (or correlated) with Fomento Economico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fomento Economico has no effect on the direction of Heineken Holding i.e., Heineken Holding and Fomento Economico go up and down completely randomly.

Pair Corralation between Heineken Holding and Fomento Economico

Assuming the 90 days horizon Heineken Holding NV is expected to under-perform the Fomento Economico. In addition to that, Heineken Holding is 1.04 times more volatile than Fomento Economico Mexicano. It trades about -0.24 of its total potential returns per unit of risk. Fomento Economico Mexicano is currently generating about -0.17 per unit of volatility. If you would invest  10,221  in Fomento Economico Mexicano on September 17, 2024 and sell it today you would lose (1,353) from holding Fomento Economico Mexicano or give up 13.24% of portfolio value over 90 days.

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

Heineken Holding NV  vs.  Fomento Economico Mexicano

Heineken Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heineken Holding NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Fomento Economico

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fomento Economico Mexicano has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Heineken Holding and Fomento Economico

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

The idea behind Heineken Holding NV and Fomento Economico Mexicano 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.