Correlation Between Fomento Econmico and Consorcio ARA

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

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

Diversification Opportunities for Fomento Econmico and Consorcio ARA

-0.52

Correlation Coefficient

Fomento Econmico  Consorcio ARA

Excellent diversification

The 3 months correlation between Fomento and Consorcio is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Econmico Mexicano and Consorcio ARA S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consorcio ARA S and Fomento Econmico 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 Econmico Mexicano are associated (or correlated) with Consorcio ARA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consorcio ARA S has no effect on the direction of Fomento Econmico i.e., Fomento Econmico and Consorcio ARA go up and down completely randomly.

Pair Corralation between Fomento Econmico and Consorcio ARA

Assuming the 90 days trading horizon Fomento Econmico Mexicano is expected to under-perform the Consorcio ARA. But the stock apears to be less risky and, when comparing its historical volatility, Fomento Econmico Mexicano is 1.73 times less risky than Consorcio ARA. The stock trades about -0.12 of its potential returns per unit of risk. The Consorcio ARA S is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  310.00  in Consorcio ARA S on September 5, 2024 and sell it today you would earn a total of  13.00  from holding Consorcio ARA S or generate 4.19% return on investment over 90 days.

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

Fomento Econmico Mexicano  vs.  Consorcio ARA S

Fomento Econmico Mexicano

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fomento Econmico Mexicano has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Consorcio ARA S

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Consorcio ARA S are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Consorcio ARA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fomento Econmico and Consorcio ARA

The main advantage of trading using opposite Fomento Econmico and Consorcio ARA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fomento Econmico position performs unexpectedly, Consorcio ARA 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 Consorcio ARA will offset losses from the drop in Consorcio ARA's long position.

The idea behind Fomento Econmico Mexicano and Consorcio ARA S 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.