Correlation Between Fomento Economico and WesBanco

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

Diversification Opportunities for Fomento Economico and WesBanco

-0.87

Correlation Coefficient

Fomento Economico  WesBanco

Pay attention - limited upside

The 3 months correlation between Fomento and WesBanco is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and WesBanco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WesBanco 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 WesBanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WesBanco has no effect on the direction of Fomento Economico i.e., Fomento Economico and WesBanco go up and down completely randomly.

Pair Corralation between Fomento Economico and WesBanco

Considering the 90-day investment horizon Fomento Economico Mexicano is expected to under-perform the WesBanco. In addition to that, Fomento Economico is 4.92 times more volatile than WesBanco. It trades about -0.23 of its total potential returns per unit of risk. WesBanco is currently generating about 0.13 per unit of volatility. If you would invest  2,481  in WesBanco on September 21, 2024 and sell it today you would earn a total of  40.00  from holding WesBanco or generate 1.61% return on investment over 90 days.

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

Fomento Economico Mexicano  vs.  WesBanco

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.

WesBanco

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WesBanco are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, WesBanco is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Fomento Economico and WesBanco

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

The idea behind Fomento Economico Mexicano and WesBanco 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.