Correlation Between Fomento Econmico and Grupo Gigante

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

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

Diversification Opportunities for Fomento Econmico and Grupo Gigante

0.2

Correlation Coefficient

Fomento Econmico  Grupo Gigante

Modest diversification

The 3 months correlation between Fomento and Grupo is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Econmico Mexicano and Grupo Gigante S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Gigante S and Fomento Econmico 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 Econmico Mexicano are associated (or correlated) with Grupo Gigante. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Gigante S has no effect on the direction of Fomento Econmico i.e., Fomento Econmico and Grupo Gigante go up and down completely randomly.

Pair Corralation between Fomento Econmico and Grupo Gigante

Assuming the 90 days trading horizon Fomento Econmico Mexicano is expected to under-perform the Grupo Gigante. But the stock apears to be less risky and, when comparing its historical volatility, Fomento Econmico Mexicano is 1.13 times less risky than Grupo Gigante. The stock trades about -0.1 of its potential returns per unit of risk. The Grupo Gigante S is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,700  in Grupo Gigante S on October 5, 2024 and sell it today you would earn a total of  100.00  from holding Grupo Gigante S or generate 3.7% return on investment over 90 days.

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

Fomento Econmico Mexicano  vs.  Grupo Gigante S

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 unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Grupo Gigante S

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Gigante S are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Grupo Gigante is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fomento Econmico and Grupo Gigante

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

The idea behind Fomento Econmico Mexicano and Grupo Gigante S 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.