Correlation Between Fomento Economico and Schneider Electric

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

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

Diversification Opportunities for Fomento Economico and Schneider Electric

-0.71

Correlation Coefficient

Fomento Economico  Schneider Electric

Pay attention - limited upside

The 3 months correlation between Fomento and Schneider is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and Schneider Electric SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schneider Electric and Fomento Economico 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 Fomento Economico Mexicano are associated (or correlated) with Schneider Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schneider Electric has no effect on the direction of Fomento Economico i.e., Fomento Economico and Schneider Electric go up and down completely randomly.

Pair Corralation between Fomento Economico and Schneider Electric

Considering the 90-day investment horizon Fomento Economico Mexicano is expected to under-perform the Schneider Electric. But the stock apears to be less risky and, when comparing its historical volatility, Fomento Economico Mexicano is 1.27 times less risky than Schneider Electric. The stock trades about -0.25 of its potential returns per unit of risk. The Schneider Electric SE is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  22,627  in Schneider Electric SE on January 30, 2024 and sell it today you would earn a total of  647.00  from holding Schneider Electric SE or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Fomento Economico Mexicano  vs.  Schneider Electric SE

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 latest abnormal performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Schneider Electric

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Schneider Electric SE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Schneider Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fomento Economico and Schneider Electric

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

The idea behind Fomento Economico Mexicano and Schneider Electric SE 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.