Correlation Between Fomento Económico and HomeToGo

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

Diversification Opportunities for Fomento Económico and HomeToGo

-0.71

Correlation Coefficient

Fomento Económico  HomeToGo

Pay attention - limited upside

The 3 months correlation between Fomento and HomeToGo is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Econmico Mexicano and HomeToGo SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeToGo SE and Fomento Económico 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 HomeToGo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeToGo SE has no effect on the direction of Fomento Económico i.e., Fomento Económico and HomeToGo go up and down completely randomly.

Pair Corralation between Fomento Económico and HomeToGo

Assuming the 90 days trading horizon Fomento Econmico Mexicano is expected to generate 0.68 times more return on investment than HomeToGo. However, Fomento Econmico Mexicano is 1.48 times less risky than HomeToGo. It trades about 0.09 of its potential returns per unit of risk. HomeToGo SE is currently generating about -0.03 per unit of risk. If you would invest  8,156  in Fomento Econmico Mexicano on December 29, 2024 and sell it today you would earn a total of  744.00  from holding Fomento Econmico Mexicano or generate 9.12% return on investment over 90 days.

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

Fomento Econmico Mexicano  vs.  HomeToGo SE

Fomento Econmico Mexicano

Risk-Adjusted Performance

OK

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

HomeToGo SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days HomeToGo SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, HomeToGo is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fomento Económico and HomeToGo

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

The idea behind Fomento Econmico Mexicano and HomeToGo SE 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.