Correlation Between NETGEAR and Fomento Economico

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

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

Diversification Opportunities for NETGEAR and Fomento Economico

-0.7

Correlation Coefficient

NETGEAR  Fomento Economico

Excellent diversification

The 3 months correlation between NETGEAR and Fomento is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and NETGEAR 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 NETGEAR 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 NETGEAR i.e., NETGEAR and Fomento Economico go up and down completely randomly.

Pair Corralation between NETGEAR and Fomento Economico

Given the investment horizon of 90 days NETGEAR is expected to under-perform the Fomento Economico. In addition to that, NETGEAR is 1.61 times more volatile than Fomento Economico Mexicano. It trades about -0.06 of its total potential returns per unit of risk. Fomento Economico Mexicano is currently generating about 0.18 per unit of volatility. If you would invest  8,438  in Fomento Economico Mexicano on December 28, 2024 and sell it today you would earn a total of  1,575  from holding Fomento Economico Mexicano or generate 18.67% return on investment over 90 days.

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

NETGEAR  vs.  Fomento Economico Mexicano

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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 13 (%) 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.

Pair Trading with NETGEAR and Fomento Economico

The main advantage of trading using opposite NETGEAR and Fomento Economico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR 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 NETGEAR 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.