Correlation Between Fomento Economico and UNITED

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

Diversification Opportunities for Fomento Economico and UNITED

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Fomento and UNITED is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and UNITED STS STL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED STS STL 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 UNITED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED STS STL has no effect on the direction of Fomento Economico i.e., Fomento Economico and UNITED go up and down completely randomly.

Pair Corralation between Fomento Economico and UNITED

Considering the 90-day investment horizon Fomento Economico Mexicano is expected to under-perform the UNITED. In addition to that, Fomento Economico is 1.05 times more volatile than UNITED STS STL. It trades about -0.08 of its total potential returns per unit of risk. UNITED STS STL is currently generating about 0.01 per unit of volatility. If you would invest  10,400  in UNITED STS STL on September 14, 2024 and sell it today you would earn a total of  5.00  from holding UNITED STS STL or generate 0.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Fomento Economico Mexicano  vs.  UNITED STS STL

 Performance 
       Timeline  
Fomento Economico 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
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.
UNITED STS STL 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in UNITED STS STL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, UNITED is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Fomento Economico and UNITED Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fomento Economico and UNITED

The main advantage of trading using opposite Fomento Economico and UNITED positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fomento Economico position performs unexpectedly, UNITED 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 UNITED will offset losses from the drop in UNITED's long position.
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The idea behind Fomento Economico Mexicano and UNITED STS STL 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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