Correlation Between Fomento Economico and TOYOTA

Can any of the company-specific risk be diversified away by investing in both Fomento Economico and TOYOTA 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 TOYOTA 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 TOYOTA 455 20 SEP 27, you can compare the effects of market volatilities on Fomento Economico and TOYOTA 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 TOYOTA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fomento Economico and TOYOTA.

Diversification Opportunities for Fomento Economico and TOYOTA

0.68

Correlation Coefficient

Fomento Economico  TOYOTA

Poor diversification

The 3 months correlation between Fomento and TOYOTA is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and TOYOTA 455 20 SEP 27 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOYOTA 455 20 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 TOYOTA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOYOTA 455 20 has no effect on the direction of Fomento Economico i.e., Fomento Economico and TOYOTA go up and down completely randomly.

Pair Corralation between Fomento Economico and TOYOTA

Considering the 90-day investment horizon Fomento Economico Mexicano is expected to under-perform the TOYOTA. In addition to that, Fomento Economico is 3.97 times more volatile than TOYOTA 455 20 SEP 27. It trades about -0.15 of its total potential returns per unit of risk. TOYOTA 455 20 SEP 27 is currently generating about -0.05 per unit of volatility. If you would invest  10,131  in TOYOTA 455 20 SEP 27 on September 5, 2024 and sell it today you would lose (104.00) from holding TOYOTA 455 20 SEP 27 or give up 1.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Fomento Economico Mexicano  vs.  TOYOTA 455 20 SEP 27

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.

TOYOTA 455 20

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOYOTA 455 20 SEP 27 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TOYOTA 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 Economico and TOYOTA

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

The idea behind Fomento Economico Mexicano and TOYOTA 455 20 SEP 27 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.