Correlation Between Treasury Wine and Fomento Economico

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

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

Diversification Opportunities for Treasury Wine and Fomento Economico

0.66

Correlation Coefficient

Treasury Wine  Fomento Economico

Poor diversification

The 3 months correlation between Treasury and Fomento is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and Treasury Wine 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 Treasury Wine Estates are associated (or correlated) with Fomento Economico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fomento Economico has no effect on the direction of Treasury Wine i.e., Treasury Wine and Fomento Economico go up and down completely randomly.

Pair Corralation between Treasury Wine and Fomento Economico

Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the Fomento Economico. In addition to that, Treasury Wine is 1.7 times more volatile than Fomento Economico Mexicano. It trades about -0.08 of its total potential returns per unit of risk. Fomento Economico Mexicano is currently generating about -0.13 per unit of volatility. If you would invest  9,958  in Fomento Economico Mexicano on September 2, 2024 and sell it today you would lose (1,019) from holding Fomento Economico Mexicano or give up 10.23% of portfolio value over 90 days.

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

Treasury Wine Estates  vs.  Fomento Economico Mexicano

Treasury Wine Estates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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.

Pair Trading with Treasury Wine and Fomento Economico

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

The idea behind Treasury Wine Estates and Fomento Economico 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.