Correlation Between Fomento Economico and Neo Concept

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

Diversification Opportunities for Fomento Economico and Neo Concept

-0.85

Correlation Coefficient

Fomento Economico  Neo Concept

Pay attention - limited upside

The 3 months correlation between Fomento and Neo is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and Neo Concept International Grou in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neo Concept Internat 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 Neo Concept. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neo Concept Internat has no effect on the direction of Fomento Economico i.e., Fomento Economico and Neo Concept go up and down completely randomly.

Pair Corralation between Fomento Economico and Neo Concept

Considering the 90-day investment horizon Fomento Economico Mexicano is expected to generate 0.3 times more return on investment than Neo Concept. However, Fomento Economico Mexicano is 3.35 times less risky than Neo Concept. It trades about 0.16 of its potential returns per unit of risk. Neo Concept International Group is currently generating about -0.04 per unit of risk. If you would invest  8,585  in Fomento Economico Mexicano on December 18, 2024 and sell it today you would earn a total of  1,474  from holding Fomento Economico Mexicano or generate 17.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Fomento Economico Mexicano  vs.  Neo Concept International Grou

Fomento Economico

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fomento Economico Mexicano are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Fomento Economico showed solid returns over the last few months and may actually be approaching a breakup point.

Neo Concept Internat

Risk-Adjusted Performance

Very Weak

Over the last 90 days Neo Concept International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Fomento Economico and Neo Concept

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

The idea behind Fomento Economico Mexicano and Neo Concept International Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.