Correlation Between HEWLETT and Fomento Economico

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

By analyzing existing cross correlation between HEWLETT PACKARD 6 and Fomento Economico Mexicano, you can compare the effects of market volatilities on HEWLETT 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 HEWLETT with a short position of Fomento Economico. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEWLETT and Fomento Economico.

Diversification Opportunities for HEWLETT and Fomento Economico

0.47

Correlation Coefficient

HEWLETT  Fomento Economico

Very weak diversification

The 3 months correlation between HEWLETT and Fomento is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding HEWLETT PACKARD 6 and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico and HEWLETT 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 HEWLETT PACKARD 6 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 HEWLETT i.e., HEWLETT and Fomento Economico go up and down completely randomly.

Pair Corralation between HEWLETT and Fomento Economico

Assuming the 90 days trading horizon HEWLETT is expected to generate 3.23 times less return on investment than Fomento Economico. But when comparing it to its historical volatility, HEWLETT PACKARD 6 is 1.82 times less risky than Fomento Economico. It trades about 0.09 of its potential returns per unit of risk. Fomento Economico Mexicano is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  8,449  in Fomento Economico Mexicano on December 2, 2024 and sell it today you would earn a total of  959.00  from holding Fomento Economico Mexicano or generate 11.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.56%
Values	Daily Returns

HEWLETT PACKARD 6  vs.  Fomento Economico Mexicano

HEWLETT PACKARD 6

Risk-Adjusted Performance

Very Weak

Over the last 90 days HEWLETT PACKARD 6 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HEWLETT 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

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fomento Economico Mexicano are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Fomento Economico may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with HEWLETT and Fomento Economico

The main advantage of trading using opposite HEWLETT and Fomento Economico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEWLETT 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 HEWLETT PACKARD 6 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..