Correlation Between Fomento Economico and BRC

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

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

Diversification Opportunities for Fomento Economico and BRC

0.75

Correlation Coefficient

Fomento Economico  BRC

Poor diversification

The 3 months correlation between Fomento and BRC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and BRC Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRC Inc and Fomento Economico 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 Economico Mexicano are associated (or correlated) with BRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRC Inc has no effect on the direction of Fomento Economico i.e., Fomento Economico and BRC go up and down completely randomly.

Pair Corralation between Fomento Economico and BRC

Considering the 90-day investment horizon Fomento Economico Mexicano is expected to under-perform the BRC. But the stock apears to be less risky and, when comparing its historical volatility, Fomento Economico Mexicano is 2.39 times less risky than BRC. The stock trades about -0.17 of its potential returns per unit of risk. The BRC Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  327.00  in BRC Inc on September 14, 2024 and sell it today you would lose (15.00) from holding BRC Inc or give up 4.59% of portfolio value over 90 days.

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

Fomento Economico Mexicano  vs.  BRC Inc

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 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.

BRC Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRC Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, BRC is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fomento Economico and BRC

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

The idea behind Fomento Economico Mexicano and BRC Inc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.