Correlation Between Fomento Econmico and Orbia Advance

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Can any of the company-specific risk be diversified away by investing in both Fomento Econmico and Orbia Advance 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 Econmico and Orbia Advance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fomento Econmico Mexicano and Orbia Advance, you can compare the effects of market volatilities on Fomento Econmico and Orbia Advance 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 Econmico with a short position of Orbia Advance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fomento Econmico and Orbia Advance.

Diversification Opportunities for Fomento Econmico and Orbia Advance

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Fomento and Orbia is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Econmico Mexicano and Orbia Advance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orbia Advance and Fomento Econmico 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 Econmico Mexicano are associated (or correlated) with Orbia Advance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orbia Advance has no effect on the direction of Fomento Econmico i.e., Fomento Econmico and Orbia Advance go up and down completely randomly.

Pair Corralation between Fomento Econmico and Orbia Advance

Assuming the 90 days trading horizon Fomento Econmico Mexicano is expected to generate 0.69 times more return on investment than Orbia Advance. However, Fomento Econmico Mexicano is 1.46 times less risky than Orbia Advance. It trades about 0.15 of its potential returns per unit of risk. Orbia Advance is currently generating about -0.04 per unit of risk. If you would invest  17,442  in Fomento Econmico Mexicano on November 30, 2024 and sell it today you would earn a total of  1,857  from holding Fomento Econmico Mexicano or generate 10.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Fomento Econmico Mexicano  vs.  Orbia Advance

 Performance 
       Timeline  
Fomento Econmico Mexicano 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Fomento Econmico Mexicano are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Fomento Econmico may actually be approaching a critical reversion point that can send shares even higher in March 2025.
Orbia Advance 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Orbia Advance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Fomento Econmico and Orbia Advance Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fomento Econmico and Orbia Advance

The main advantage of trading using opposite Fomento Econmico and Orbia Advance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fomento Econmico position performs unexpectedly, Orbia Advance 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 Orbia Advance will offset losses from the drop in Orbia Advance's long position.
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The idea behind Fomento Econmico Mexicano and Orbia Advance 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 the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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