Correlation Between Fomento Economico and WEC Energy

Can any of the company-specific risk be diversified away by investing in both Fomento Economico and WEC Energy 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 WEC Energy 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 WEC Energy Group, you can compare the effects of market volatilities on Fomento Economico and WEC Energy 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 WEC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fomento Economico and WEC Energy.

Diversification Opportunities for Fomento Economico and WEC Energy

-0.52

Correlation Coefficient

Fomento Economico  WEC Energy

Excellent diversification

The 3 months correlation between Fomento and WEC is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and WEC Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEC Energy Group 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 WEC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEC Energy Group has no effect on the direction of Fomento Economico i.e., Fomento Economico and WEC Energy go up and down completely randomly.

Pair Corralation between Fomento Economico and WEC Energy

Considering the 90-day investment horizon Fomento Economico Mexicano is expected to under-perform the WEC Energy. In addition to that, Fomento Economico is 1.12 times more volatile than WEC Energy Group. It trades about -0.06 of its total potential returns per unit of risk. WEC Energy Group is currently generating about 0.12 per unit of volatility. If you would invest  7,720  in WEC Energy Group on January 29, 2024 and sell it today you would earn a total of  429.00  from holding WEC Energy Group or generate 5.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Fomento Economico Mexicano  vs.  WEC Energy Group

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.

WEC Energy Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WEC Energy Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, WEC Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fomento Economico and WEC Energy

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

The idea behind Fomento Economico Mexicano and WEC Energy Group 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.