Correlation Between Fomento Economico and Cebu Air
Can any of the company-specific risk be diversified away by investing in both Fomento Economico and Cebu Air 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 Economico and Cebu Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fomento Economico Mexicano and Cebu Air ADR, you can compare the effects of market volatilities on Fomento Economico and Cebu Air 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 Economico with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fomento Economico and Cebu Air.
Diversification Opportunities for Fomento Economico and Cebu Air
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fomento and Cebu is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and Cebu Air ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air ADR and Fomento Economico 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 Economico Mexicano are associated (or correlated) with Cebu Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cebu Air ADR has no effect on the direction of Fomento Economico i.e., Fomento Economico and Cebu Air go up and down completely randomly.
Pair Corralation between Fomento Economico and Cebu Air
Considering the 90-day investment horizon Fomento Economico Mexicano is expected to generate 0.36 times more return on investment than Cebu Air. However, Fomento Economico Mexicano is 2.81 times less risky than Cebu Air. It trades about -0.08 of its potential returns per unit of risk. Cebu Air ADR is currently generating about -0.03 per unit of risk. If you would invest 12,343 in Fomento Economico Mexicano on August 26, 2024 and sell it today you would lose (3,629) from holding Fomento Economico Mexicano or give up 29.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fomento Economico Mexicano vs. Cebu Air ADR
Performance |
| Timeline |
| Fomento Economico |
| Cebu Air ADR |
Fomento Economico and Cebu Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fomento Economico and Cebu Air
The main advantage of trading using opposite Fomento Economico and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fomento Economico position performs unexpectedly, Cebu Air 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 Cebu Air will offset losses from the drop in Cebu Air's long position.| Fomento Economico vs. Ambev SA ADR | Fomento Economico vs. Boston Beer | Fomento Economico vs. Carlsberg AS | Fomento Economico vs. Molson Coors Brewing |
| Cebu Air vs. Air China Limited | Cebu Air vs. Air France KLM SA | Cebu Air vs. AirAsia Group Berhad | Cebu Air vs. China Southern Airlines |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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