Correlation Between Four Seasons and Fomento Economico

Can any of the company-specific risk be diversified away by investing in both Four Seasons 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 Four Seasons and Fomento Economico into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Four Seasons Education and Fomento Economico Mexicano, you can compare the effects of market volatilities on Four Seasons 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 Four Seasons with a short position of Fomento Economico. Check out your portfolio center. Please also check ongoing floating volatility patterns of Four Seasons and Fomento Economico.

Diversification Opportunities for Four Seasons and Fomento Economico

0.47

Correlation Coefficient

Four Seasons  Fomento Economico

Very weak diversification

The 3 months correlation between Four and Fomento is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Four Seasons Education and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and Four Seasons 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 Four Seasons Education 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 Four Seasons i.e., Four Seasons and Fomento Economico go up and down completely randomly.

Pair Corralation between Four Seasons and Fomento Economico

Given the investment horizon of 90 days Four Seasons Education is expected to under-perform the Fomento Economico. In addition to that, Four Seasons is 1.33 times more volatile than Fomento Economico Mexicano. It trades about -0.09 of its total potential returns per unit of risk. Fomento Economico Mexicano is currently generating about -0.03 per unit of volatility. If you would invest  8,850  in Fomento Economico Mexicano on September 24, 2024 and sell it today you would lose (120.00) from holding Fomento Economico Mexicano or give up 1.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Four Seasons Education  vs.  Fomento Economico Mexicano

Four Seasons Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Four Seasons Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Fomento Economico

Risk-Adjusted Performance

0 of 100

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 latest abnormal performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Four Seasons and Fomento Economico

The main advantage of trading using opposite Four Seasons and Fomento Economico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Four Seasons 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 Four Seasons Education 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.