Correlation Between Southland Holdings and Fomento Economico
Can any of the company-specific risk be diversified away by investing in both Southland Holdings and Fomento Economico 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 Southland Holdings and Fomento Economico into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southland Holdings and Fomento Economico Mexicano, you can compare the effects of market volatilities on Southland Holdings and Fomento Economico 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 Southland Holdings with a short position of Fomento Economico. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southland Holdings and Fomento Economico.
Diversification Opportunities for Southland Holdings and Fomento Economico
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southland and Fomento is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Southland Holdings and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and Southland Holdings 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 Southland Holdings are associated (or correlated) with Fomento Economico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fomento Economico has no effect on the direction of Southland Holdings i.e., Southland Holdings and Fomento Economico go up and down completely randomly.
Pair Corralation between Southland Holdings and Fomento Economico
Given the investment horizon of 90 days Southland Holdings is expected to under-perform the Fomento Economico. In addition to that, Southland Holdings is 2.74 times more volatile than Fomento Economico Mexicano. It trades about -0.04 of its total potential returns per unit of risk. Fomento Economico Mexicano is currently generating about -0.01 per unit of volatility. If you would invest 10,108 in Fomento Economico Mexicano on August 31, 2024 and sell it today you would lose (1,169) from holding Fomento Economico Mexicano or give up 11.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southland Holdings vs. Fomento Economico Mexicano
Performance |
| Timeline |
| Southland Holdings |
| Fomento Economico |
Southland Holdings and Fomento Economico Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southland Holdings and Fomento Economico
The main advantage of trading using opposite Southland Holdings and Fomento Economico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southland Holdings position performs unexpectedly, Fomento Economico 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 Fomento Economico will offset losses from the drop in Fomento Economico's long position.| Southland Holdings vs. Citi Trends | Southland Holdings vs. American Eagle Outfitters | Southland Holdings vs. Summit Materials | Southland Holdings vs. Boot Barn Holdings |
| Fomento Economico vs. Ambev SA ADR | Fomento Economico vs. Boston Beer | Fomento Economico vs. Carlsberg AS | Fomento Economico vs. Molson Coors Brewing |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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