Correlation Between 00507VAP4 and Fomento Economico

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Can any of the company-specific risk be diversified away by investing in both 00507VAP4 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 00507VAP4 and Fomento Economico into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US00507VAP40 and Fomento Economico Mexicano, you can compare the effects of market volatilities on 00507VAP4 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 00507VAP4 with a short position of Fomento Economico. Check out your portfolio center. Please also check ongoing floating volatility patterns of 00507VAP4 and Fomento Economico.

Diversification Opportunities for 00507VAP4 and Fomento Economico

-0.14
  Correlation Coefficient

Good diversification

The 3 months correlation between 00507VAP4 and Fomento is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding US00507VAP40 and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and 00507VAP4 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 US00507VAP40 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 00507VAP4 i.e., 00507VAP4 and Fomento Economico go up and down completely randomly.

Pair Corralation between 00507VAP4 and Fomento Economico

Assuming the 90 days trading horizon US00507VAP40 is expected to generate 4.78 times more return on investment than Fomento Economico. However, 00507VAP4 is 4.78 times more volatile than Fomento Economico Mexicano. It trades about 0.08 of its potential returns per unit of risk. Fomento Economico Mexicano is currently generating about -0.19 per unit of risk. If you would invest  7,633  in US00507VAP40 on September 12, 2024 and sell it today you would earn a total of  344.00  from holding US00507VAP40 or generate 4.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy61.9%
ValuesDaily Returns

US00507VAP40  vs.  Fomento Economico Mexicano

 Performance 
       Timeline  
US00507VAP40 

Risk-Adjusted Performance

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Over the last 90 days US00507VAP40 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 00507VAP4 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Fomento Economico 

Risk-Adjusted Performance

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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.

00507VAP4 and Fomento Economico Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 00507VAP4 and Fomento Economico

The main advantage of trading using opposite 00507VAP4 and Fomento Economico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 00507VAP4 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.
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The idea behind US00507VAP40 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.
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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