Correlation Between Fomento Economico and Wal Mart
Can any of the company-specific risk be diversified away by investing in both Fomento Economico and Wal Mart 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 Wal Mart 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 Wal Mart de, you can compare the effects of market volatilities on Fomento Economico and Wal Mart 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 Wal Mart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fomento Economico and Wal Mart.
Diversification Opportunities for Fomento Economico and Wal Mart
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fomento and Wal is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and Wal Mart de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wal Mart de 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 Wal Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wal Mart de has no effect on the direction of Fomento Economico i.e., Fomento Economico and Wal Mart go up and down completely randomly.
Pair Corralation between Fomento Economico and Wal Mart
Considering the 90-day investment horizon Fomento Economico Mexicano is expected to under-perform the Wal Mart. But the stock apears to be less risky and, when comparing its historical volatility, Fomento Economico Mexicano is 1.17 times less risky than Wal Mart. The stock trades about -0.1 of its potential returns per unit of risk. The Wal Mart de is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 4,022 in Wal Mart de on November 4, 2024 and sell it today you would lose (1,415) from holding Wal Mart de or give up 35.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fomento Economico Mexicano vs. Wal Mart de
Performance |
| Timeline |
| Fomento Economico |
| Wal Mart de |
Fomento Economico and Wal Mart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fomento Economico and Wal Mart
The main advantage of trading using opposite Fomento Economico and Wal Mart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fomento Economico position performs unexpectedly, Wal Mart 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 Wal Mart will offset losses from the drop in Wal Mart'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 |
| Wal Mart vs. Wal Mart de | Wal Mart vs. Fomento Economico Mexicano | Wal Mart vs. Tesco PLC | Wal Mart vs. United Overseas Bank |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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