Correlation Between Coca-Cola FEMSA and Xtrackers LevDAX

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

Diversification Opportunities for Coca-Cola FEMSA and Xtrackers LevDAX

-0.24

Correlation Coefficient

Coca-Cola FEMSA  Xtrackers LevDAX

Very good diversification

The 3 months correlation between Coca-Cola and Xtrackers is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola FEMSA SAB and Xtrackers LevDAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers LevDAX 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 Xtrackers LevDAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers LevDAX has no effect on the direction of Coca-Cola FEMSA i.e., Coca-Cola FEMSA and Xtrackers LevDAX go up and down completely randomly.

Pair Corralation between Coca-Cola FEMSA and Xtrackers LevDAX

Assuming the 90 days trading horizon Coca Cola FEMSA SAB is expected to generate 42.23 times more return on investment than Xtrackers LevDAX. However, Coca-Cola FEMSA is 42.23 times more volatile than Xtrackers LevDAX. It trades about 0.15 of its potential returns per unit of risk. Xtrackers LevDAX is currently generating about -0.13 per unit of risk. If you would invest  875.00  in Coca Cola FEMSA SAB on January 26, 2024 and sell it today you would lose (15.00) from holding Coca Cola FEMSA SAB or give up 1.71% of portfolio value over 90 days.

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

Coca Cola FEMSA SAB  vs.  Xtrackers LevDAX

Coca Cola FEMSA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola FEMSA SAB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Coca-Cola FEMSA reported solid returns over the last few months and may actually be approaching a breakup point.

Xtrackers LevDAX

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers LevDAX are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xtrackers LevDAX may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Coca-Cola FEMSA and Xtrackers LevDAX

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

The idea behind Coca Cola FEMSA SAB and Xtrackers LevDAX 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.