Correlation Between Fomento Economico and COLUMBIA

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Can any of the company-specific risk be diversified away by investing in both Fomento Economico and COLUMBIA 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 COLUMBIA 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 COLUMBIA PIPELINE GROUP, you can compare the effects of market volatilities on Fomento Economico and COLUMBIA 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 COLUMBIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fomento Economico and COLUMBIA.

Diversification Opportunities for Fomento Economico and COLUMBIA

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Fomento and COLUMBIA is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and COLUMBIA PIPELINE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COLUMBIA PIPELINE 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 COLUMBIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COLUMBIA PIPELINE has no effect on the direction of Fomento Economico i.e., Fomento Economico and COLUMBIA go up and down completely randomly.

Pair Corralation between Fomento Economico and COLUMBIA

Considering the 90-day investment horizon Fomento Economico is expected to generate 38.34 times less return on investment than COLUMBIA. But when comparing it to its historical volatility, Fomento Economico Mexicano is 28.74 times less risky than COLUMBIA. It trades about 0.03 of its potential returns per unit of risk. COLUMBIA PIPELINE GROUP is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,894  in COLUMBIA PIPELINE GROUP on September 12, 2024 and sell it today you would lose (33.00) from holding COLUMBIA PIPELINE GROUP or give up 0.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.96%
ValuesDaily Returns

Fomento Economico Mexicano  vs.  COLUMBIA PIPELINE GROUP

 Performance 
       Timeline  
Fomento Economico 

Risk-Adjusted Performance

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Over the last 90 days Fomento Economico Mexicano has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
COLUMBIA PIPELINE 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days COLUMBIA PIPELINE GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, COLUMBIA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Fomento Economico and COLUMBIA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fomento Economico and COLUMBIA

The main advantage of trading using opposite Fomento Economico and COLUMBIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fomento Economico position performs unexpectedly, COLUMBIA 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 COLUMBIA will offset losses from the drop in COLUMBIA's long position.
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The idea behind Fomento Economico Mexicano and COLUMBIA PIPELINE GROUP 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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