Correlation Between Dave Busters and Fomento Economico

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

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

Diversification Opportunities for Dave Busters and Fomento Economico

0.29

Correlation Coefficient

Dave Busters  Fomento Economico

Modest diversification

The 3 months correlation between Dave and Fomento is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Dave Busters Entertainment and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and Dave Busters 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 Dave Busters Entertainment 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 Dave Busters i.e., Dave Busters and Fomento Economico go up and down completely randomly.

Pair Corralation between Dave Busters and Fomento Economico

Given the investment horizon of 90 days Dave Busters Entertainment is expected to under-perform the Fomento Economico. In addition to that, Dave Busters is 3.66 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Dave Busters Entertainment  vs.  Fomento Economico Mexicano

Dave Busters Enterta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dave Busters Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Dave Busters is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Dave Busters and Fomento Economico

The main advantage of trading using opposite Dave Busters and Fomento Economico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dave Busters 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 Dave Busters Entertainment 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.