Correlation Between National CineMedia and Fomento Economico

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

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

Diversification Opportunities for National CineMedia and Fomento Economico

-0.14

Correlation Coefficient

National CineMedia  Fomento Economico

Good diversification

The 3 months correlation between National and Fomento is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and National CineMedia 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 National CineMedia are associated (or correlated) with Fomento Economico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fomento Economico has no effect on the direction of National CineMedia i.e., National CineMedia and Fomento Economico go up and down completely randomly.

Pair Corralation between National CineMedia and Fomento Economico

Given the investment horizon of 90 days National CineMedia is expected to under-perform the Fomento Economico. In addition to that, National CineMedia is 1.01 times more volatile than Fomento Economico Mexicano. It trades about -0.11 of its total potential returns per unit of risk. Fomento Economico Mexicano is currently generating about -0.03 per unit of volatility. If you would invest  8,850  in Fomento Economico Mexicano on September 26, 2024 and sell it today you would lose (117.00) from holding Fomento Economico Mexicano or give up 1.32% of portfolio value over 90 days.

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

National CineMedia  vs.  Fomento Economico Mexicano

National CineMedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National CineMedia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, National CineMedia is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with National CineMedia and Fomento Economico

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

The idea behind National CineMedia and Fomento Economico Mexicano 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.