Correlation Between EXPEDIA and Fomento Economico

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Can any of the company-specific risk be diversified away by investing in both EXPEDIA 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 EXPEDIA and Fomento Economico into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EXPEDIA GROUP INC and Fomento Economico Mexicano, you can compare the effects of market volatilities on EXPEDIA 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 EXPEDIA with a short position of Fomento Economico. Check out your portfolio center. Please also check ongoing floating volatility patterns of EXPEDIA and Fomento Economico.

Diversification Opportunities for EXPEDIA and Fomento Economico

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between EXPEDIA and Fomento is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding EXPEDIA GROUP INC and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and EXPEDIA 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 EXPEDIA GROUP INC 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 EXPEDIA i.e., EXPEDIA and Fomento Economico go up and down completely randomly.

Pair Corralation between EXPEDIA and Fomento Economico

Assuming the 90 days trading horizon EXPEDIA GROUP INC is expected to generate 0.4 times more return on investment than Fomento Economico. However, EXPEDIA GROUP INC is 2.48 times less risky than Fomento Economico. It trades about -0.18 of its potential returns per unit of risk. Fomento Economico Mexicano is currently generating about -0.18 per unit of risk. If you would invest  10,100  in EXPEDIA GROUP INC on September 16, 2024 and sell it today you would lose (572.00) from holding EXPEDIA GROUP INC or give up 5.66% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.46%
ValuesDaily Returns

EXPEDIA GROUP INC  vs.  Fomento Economico Mexicano

 Performance 
       Timeline  
EXPEDIA GROUP INC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days EXPEDIA GROUP INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EXPEDIA 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

 
Weak
 
Strong
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.

EXPEDIA and Fomento Economico Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with EXPEDIA and Fomento Economico

The main advantage of trading using opposite EXPEDIA and Fomento Economico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EXPEDIA 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 EXPEDIA GROUP INC 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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