Correlation Between Coca-Cola FEMSA and Union Pacific

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

Diversification Opportunities for Coca-Cola FEMSA and Union Pacific

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between Coca-Cola and Union is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Coca-Cola FEMSA SAB and Union Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Pacific 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 Union Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Pacific has no effect on the direction of Coca-Cola FEMSA i.e., Coca-Cola FEMSA and Union Pacific go up and down completely randomly.

Pair Corralation between Coca-Cola FEMSA and Union Pacific

Assuming the 90 days horizon Coca-Cola FEMSA SAB is expected to generate 43.12 times more return on investment than Union Pacific. However, Coca-Cola FEMSA is 43.12 times more volatile than Union Pacific. It trades about 0.06 of its potential returns per unit of risk. Union Pacific is currently generating about 0.02 per unit of risk. If you would invest  430.00  in Coca-Cola FEMSA SAB on September 5, 2022 and sell it today you would earn a total of  470.00  from holding Coca-Cola FEMSA SAB or generate 109.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

Coca-Cola FEMSA SAB  vs.  Union Pacific

 Performance (%) 
       Timeline  
Coca-Cola FEMSA SAB 
Coca-Cola Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Coca-Cola FEMSA SAB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Coca-Cola FEMSA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Coca-Cola Price Channel

Union Pacific 
Union Performance
0 of 100
Over the last 90 days Union Pacific has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Union Pacific is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the insiders.

Union Price Channel

Coca-Cola FEMSA and Union Pacific Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca-Cola FEMSA and Union Pacific

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

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