Correlation Between Fomento Economico and TFI International

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

Diversification Opportunities for Fomento Economico and TFI International

-0.64

Correlation Coefficient

Fomento Economico  TFI International

Excellent diversification

The 3 months correlation between Fomento and TFI is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and TFI International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFI International 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 TFI International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFI International has no effect on the direction of Fomento Economico i.e., Fomento Economico and TFI International go up and down completely randomly.

Pair Corralation between Fomento Economico and TFI International

Considering the 90-day investment horizon Fomento Economico Mexicano is expected to under-perform the TFI International. But the stock apears to be less risky and, when comparing its historical volatility, Fomento Economico Mexicano is 1.44 times less risky than TFI International. The stock trades about -0.13 of its potential returns per unit of risk. The TFI International is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  13,689  in TFI International on September 29, 2024 and sell it today you would earn a total of  82.00  from holding TFI International or generate 0.6% return on investment over 90 days.

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

Fomento Economico Mexicano  vs.  TFI International

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.

TFI International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TFI International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, TFI International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Fomento Economico and TFI International

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

The idea behind Fomento Economico Mexicano and TFI International 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.