Correlation Between Fomento Economico and Four Seasons

Can any of the company-specific risk be diversified away by investing in both Fomento Economico and Four Seasons 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 Four Seasons 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 Four Seasons Education, you can compare the effects of market volatilities on Fomento Economico and Four Seasons 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 Four Seasons. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fomento Economico and Four Seasons.

Diversification Opportunities for Fomento Economico and Four Seasons

0.47

Correlation Coefficient

Fomento Economico  Four Seasons

Very weak diversification

The 3 months correlation between Fomento and Four is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and Four Seasons Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Four Seasons Education 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 Four Seasons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Four Seasons Education has no effect on the direction of Fomento Economico i.e., Fomento Economico and Four Seasons go up and down completely randomly.

Pair Corralation between Fomento Economico and Four Seasons

Considering the 90-day investment horizon Fomento Economico Mexicano is expected to generate 0.75 times more return on investment than Four Seasons. However, Fomento Economico Mexicano is 1.33 times less risky than Four Seasons. It trades about -0.03 of its potential returns per unit of risk. Four Seasons Education is currently generating about -0.09 per unit of risk. 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

Fomento Economico Mexicano  vs.  Four Seasons Education

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.

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.

Pair Trading with Fomento Economico and Four Seasons

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

The idea behind Fomento Economico Mexicano and Four Seasons Education 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.