Correlation Between Cheer Holding and Fomento Economico

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

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

Diversification Opportunities for Cheer Holding and Fomento Economico

0.72

Correlation Coefficient

Cheer Holding  Fomento Economico

Poor diversification

The 3 months correlation between Cheer and Fomento is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Cheer Holding and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and Cheer Holding 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 Cheer Holding 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 Cheer Holding i.e., Cheer Holding and Fomento Economico go up and down completely randomly.

Pair Corralation between Cheer Holding and Fomento Economico

Considering the 90-day investment horizon Cheer Holding is expected to under-perform the Fomento Economico. In addition to that, Cheer Holding is 3.07 times more volatile than Fomento Economico Mexicano. It trades about -0.04 of its total potential returns per unit of risk. Fomento Economico Mexicano is currently generating about 0.02 per unit of volatility. If you would invest  7,982  in Fomento Economico Mexicano on October 10, 2024 and sell it today you would earn a total of  528.00  from holding Fomento Economico Mexicano or generate 6.61% return on investment over 90 days.

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

Cheer Holding  vs.  Fomento Economico Mexicano

Cheer Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheer Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 abnormal performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Cheer Holding and Fomento Economico

The main advantage of trading using opposite Cheer Holding and Fomento Economico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheer Holding 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 Cheer Holding 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.