Correlation Between Fomento Economico and Amkor Technology

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

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

Diversification Opportunities for Fomento Economico and Amkor Technology

0.78

Correlation Coefficient

Fomento Economico  Amkor Technology

Poor diversification

The 3 months correlation between Fomento and Amkor is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and Amkor Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amkor Technology and Fomento Economico 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 Economico Mexicano are associated (or correlated) with Amkor Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amkor Technology has no effect on the direction of Fomento Economico i.e., Fomento Economico and Amkor Technology go up and down completely randomly.

Pair Corralation between Fomento Economico and Amkor Technology

Considering the 90-day investment horizon Fomento Economico Mexicano is expected to under-perform the Amkor Technology. But the stock apears to be less risky and, when comparing its historical volatility, Fomento Economico Mexicano is 1.03 times less risky than Amkor Technology. The stock trades about -0.05 of its potential returns per unit of risk. The Amkor Technology is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,493  in Amkor Technology on September 19, 2024 and sell it today you would earn a total of  205.00  from holding Amkor Technology or generate 8.22% return on investment over 90 days.

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

Fomento Economico Mexicano  vs.  Amkor Technology

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Amkor Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amkor Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's forward-looking signals remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Fomento Economico and Amkor Technology

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

The idea behind Fomento Economico Mexicano and Amkor Technology 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.