Correlation Between HomeToGo and Fomento Econmico

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

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

Diversification Opportunities for HomeToGo and Fomento Econmico

0.11

Correlation Coefficient

HomeToGo  Fomento Econmico

Average diversification

The 3 months correlation between HomeToGo and Fomento is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding HomeToGo SE and Fomento Econmico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Econmico Mexicano and HomeToGo 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 HomeToGo SE are associated (or correlated) with Fomento Econmico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fomento Econmico Mexicano has no effect on the direction of HomeToGo i.e., HomeToGo and Fomento Econmico go up and down completely randomly.

Pair Corralation between HomeToGo and Fomento Econmico

Assuming the 90 days trading horizon HomeToGo SE is expected to generate 1.93 times more return on investment than Fomento Econmico. However, HomeToGo is 1.93 times more volatile than Fomento Econmico Mexicano. It trades about 0.01 of its potential returns per unit of risk. Fomento Econmico Mexicano is currently generating about -0.1 per unit of risk. If you would invest  203.00  in HomeToGo SE on September 24, 2024 and sell it today you would lose (9.00) from holding HomeToGo SE or give up 4.43% of portfolio value over 90 days.

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

HomeToGo SE  vs.  Fomento Econmico Mexicano

HomeToGo SE

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HomeToGo SE are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, HomeToGo is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with HomeToGo and Fomento Econmico

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

The idea behind HomeToGo SE and Fomento Econmico Mexicano 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.