Correlation Between ATT and Fomento Economico
Can any of the company-specific risk be diversified away by investing in both ATT 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 ATT and Fomento Economico into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Fomento Economico Mexicano, you can compare the effects of market volatilities on ATT 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 ATT with a short position of Fomento Economico. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Fomento Economico.
Diversification Opportunities for ATT and Fomento Economico
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ATT and Fomento is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and ATT 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 ATT Inc 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 ATT i.e., ATT and Fomento Economico go up and down completely randomly.
Pair Corralation between ATT and Fomento Economico
Given the investment horizon of 90 days ATT Inc is expected to generate 0.53 times more return on investment than Fomento Economico. However, ATT Inc is 1.89 times less risky than Fomento Economico. It trades about -0.09 of its potential returns per unit of risk. Fomento Economico Mexicano is currently generating about -0.1 per unit of risk. If you would invest 2,055 in ATT Inc on November 2, 2024 and sell it today you would lose (95.00) from holding ATT Inc or give up 4.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ATT Inc vs. Fomento Economico Mexicano
Performance |
| Timeline |
| ATT Inc |
| Fomento Economico |
ATT and Fomento Economico Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and Fomento Economico
The main advantage of trading using opposite ATT and Fomento Economico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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.The idea behind ATT Inc and Fomento Economico Mexicano 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.| 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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