Correlation Between Anheuser Busch and Fomento Economico

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

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

Diversification Opportunities for Anheuser Busch and Fomento Economico

0.7

Correlation Coefficient

Anheuser Busch  Fomento Economico

Poor diversification

The 3 months correlation between Anheuser and Fomento is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch Inbev and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and Anheuser Busch 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 Anheuser Busch Inbev 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 Anheuser Busch i.e., Anheuser Busch and Fomento Economico go up and down completely randomly.

Pair Corralation between Anheuser Busch and Fomento Economico

Considering the 90-day investment horizon Anheuser Busch Inbev is expected to generate 1.1 times more return on investment than Fomento Economico. However, Anheuser Busch is 1.1 times more volatile than Fomento Economico Mexicano. It trades about -0.15 of its potential returns per unit of risk. Fomento Economico Mexicano is currently generating about -0.22 per unit of risk. If you would invest  6,144  in Anheuser Busch Inbev on August 30, 2024 and sell it today you would lose (736.00) from holding Anheuser Busch Inbev or give up 11.98% of portfolio value over 90 days.

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

Anheuser Busch Inbev  vs.  Fomento Economico Mexicano

Anheuser Busch Inbev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch Inbev has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Anheuser Busch and Fomento Economico

The main advantage of trading using opposite Anheuser Busch and Fomento Economico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anheuser Busch 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 Anheuser Busch Inbev 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.