Correlation Between Fomento Econmico and Grupo Aeroportuario

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

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

Diversification Opportunities for Fomento Econmico and Grupo Aeroportuario

-0.57

Correlation Coefficient

Fomento Econmico  Grupo Aeroportuario

Excellent diversification

The 3 months correlation between Fomento and Grupo is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Econmico Mexicano and Grupo Aeroportuario del in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Aeroportuario del and Fomento Econmico 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 Econmico Mexicano are associated (or correlated) with Grupo Aeroportuario. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Aeroportuario del has no effect on the direction of Fomento Econmico i.e., Fomento Econmico and Grupo Aeroportuario go up and down completely randomly.

Pair Corralation between Fomento Econmico and Grupo Aeroportuario

Assuming the 90 days trading horizon Fomento Econmico is expected to generate 1.14 times less return on investment than Grupo Aeroportuario. But when comparing it to its historical volatility, Fomento Econmico Mexicano is 1.71 times less risky than Grupo Aeroportuario. It trades about 0.03 of its potential returns per unit of risk. Grupo Aeroportuario del is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14,804  in Grupo Aeroportuario del on August 24, 2024 and sell it today you would earn a total of  1,976  from holding Grupo Aeroportuario del or generate 13.35% return on investment over 90 days.

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

Fomento Econmico Mexicano  vs.  Grupo Aeroportuario del

Fomento Econmico Mexicano

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fomento Econmico Mexicano has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Grupo Aeroportuario del

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aeroportuario del are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Grupo Aeroportuario showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fomento Econmico and Grupo Aeroportuario

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

The idea behind Fomento Econmico Mexicano and Grupo Aeroportuario del 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.