Correlation Between Fomento Economico and Freedom Bank
Can any of the company-specific risk be diversified away by investing in both Fomento Economico and Freedom Bank 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 Freedom Bank 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 Freedom Bank of, you can compare the effects of market volatilities on Fomento Economico and Freedom Bank 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 Freedom Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fomento Economico and Freedom Bank.
Diversification Opportunities for Fomento Economico and Freedom Bank
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fomento and Freedom is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank 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 Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of Fomento Economico i.e., Fomento Economico and Freedom Bank go up and down completely randomly.
Pair Corralation between Fomento Economico and Freedom Bank
Considering the 90-day investment horizon Fomento Economico Mexicano is expected to under-perform the Freedom Bank. In addition to that, Fomento Economico is 1.46 times more volatile than Freedom Bank of. It trades about -0.01 of its total potential returns per unit of risk. Freedom Bank of is currently generating about 0.01 per unit of volatility. If you would invest 1,040 in Freedom Bank of on August 31, 2024 and sell it today you would earn a total of 21.00 from holding Freedom Bank of or generate 2.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 77.41% |
| Values | Daily Returns |
Fomento Economico Mexicano vs. Freedom Bank of
Performance |
| Timeline |
| Fomento Economico |
| Freedom Bank |
Fomento Economico and Freedom Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fomento Economico and Freedom Bank
The main advantage of trading using opposite Fomento Economico and Freedom Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fomento Economico position performs unexpectedly, Freedom Bank 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 Freedom Bank will offset losses from the drop in Freedom Bank'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 |
| Freedom Bank vs. HUMANA INC | Freedom Bank vs. SCOR PK | Freedom Bank vs. Aquagold International | Freedom Bank vs. Thrivent High Yield |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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