Correlation Between Fomento Economico and Expand Energy

Can any of the company-specific risk be diversified away by investing in both Fomento Economico and Expand Energy 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 Expand Energy 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 Expand Energy, you can compare the effects of market volatilities on Fomento Economico and Expand Energy 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 Expand Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fomento Economico and Expand Energy.

Diversification Opportunities for Fomento Economico and Expand Energy

-0.24

Correlation Coefficient

Fomento Economico  Expand Energy

Very good diversification

The 3 months correlation between Fomento and Expand is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and Expand Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expand Energy 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 Expand Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expand Energy has no effect on the direction of Fomento Economico i.e., Fomento Economico and Expand Energy go up and down completely randomly.

Pair Corralation between Fomento Economico and Expand Energy

Considering the 90-day investment horizon Fomento Economico Mexicano is expected to generate 1.07 times more return on investment than Expand Energy. However, Fomento Economico is 1.07 times more volatile than Expand Energy. It trades about 0.09 of its potential returns per unit of risk. Expand Energy is currently generating about 0.0 per unit of risk. If you would invest  8,835  in Fomento Economico Mexicano on December 11, 2024 and sell it today you would earn a total of  827.00  from holding Fomento Economico Mexicano or generate 9.36% return on investment over 90 days.

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

Fomento Economico Mexicano  vs.  Expand Energy

Fomento Economico

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fomento Economico Mexicano are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Fomento Economico may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Expand Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Expand Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Expand Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fomento Economico and Expand Energy

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

The idea behind Fomento Economico Mexicano and Expand Energy 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..