Correlation Between China Resources and Fomento Econmico

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

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

Diversification Opportunities for China Resources and Fomento Econmico

0.45

Correlation Coefficient

China Resources  Fomento Econmico

Very weak diversification

The 3 months correlation between China and Fomento is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer 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 China Resources 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 China Resources Beer 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 China Resources i.e., China Resources and Fomento Econmico go up and down completely randomly.

Pair Corralation between China Resources and Fomento Econmico

Assuming the 90 days horizon China Resources Beer is expected to generate 2.75 times more return on investment than Fomento Econmico. However, China Resources is 2.75 times more volatile than Fomento Econmico Mexicano. It trades about 0.04 of its potential returns per unit of risk. Fomento Econmico Mexicano is currently generating about -0.08 per unit of risk. If you would invest  277.00  in China Resources Beer on September 23, 2024 and sell it today you would earn a total of  35.00  from holding China Resources Beer or generate 12.64% return on investment over 90 days.

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

China Resources Beer  vs.  Fomento Econmico Mexicano

China Resources Beer

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Resources reported solid returns over the last few months and may actually be approaching a breakup point.

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 nearly stable primary indicators, Fomento Econmico is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Resources and Fomento Econmico

The main advantage of trading using opposite China Resources and Fomento Econmico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources 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 China Resources Beer 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.

Check out your portfolio center.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.