Correlation Between Promotora and Desarrolladora Homex

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

By analyzing existing cross correlation between Promotora y Operadora and Desarrolladora Homex SAB, you can compare the effects of market volatilities on Promotora and Desarrolladora Homex 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 Promotora with a short position of Desarrolladora Homex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Promotora and Desarrolladora Homex.

Diversification Opportunities for Promotora and Desarrolladora Homex

-0.63

Correlation Coefficient

Promotora  Desarrolladora Homex

Excellent diversification

The 3 months correlation between Promotora and Desarrolladora is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Promotora y Operadora and Desarrolladora Homex SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desarrolladora Homex SAB and Promotora 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 Promotora y Operadora are associated (or correlated) with Desarrolladora Homex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desarrolladora Homex SAB has no effect on the direction of Promotora i.e., Promotora and Desarrolladora Homex go up and down completely randomly.

Pair Corralation between Promotora and Desarrolladora Homex

Assuming the 90 days trading horizon Promotora y Operadora is expected to generate 0.23 times more return on investment than Desarrolladora Homex. However, Promotora y Operadora is 4.32 times less risky than Desarrolladora Homex. It trades about 0.18 of its potential returns per unit of risk. Desarrolladora Homex SAB is currently generating about -0.13 per unit of risk. If you would invest  12,940  in Promotora y Operadora on October 21, 2024 and sell it today you would earn a total of  2,160  from holding Promotora y Operadora or generate 16.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Promotora y Operadora  vs.  Desarrolladora Homex SAB

Promotora y Operadora

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Promotora y Operadora are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Promotora disclosed solid returns over the last few months and may actually be approaching a breakup point.

Desarrolladora Homex SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Desarrolladora Homex SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Promotora and Desarrolladora Homex

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

The idea behind Promotora y Operadora and Desarrolladora Homex SAB 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.