Correlation Between Fomento Economico and NETGEAR

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

Diversification Opportunities for Fomento Economico and NETGEAR

0.3

Correlation Coefficient

Fomento Economico  NETGEAR

Weak diversification

The 3 months correlation between Fomento and NETGEAR is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Fomento Economico i.e., Fomento Economico and NETGEAR go up and down completely randomly.

Pair Corralation between Fomento Economico and NETGEAR

Considering the 90-day investment horizon Fomento Economico Mexicano is expected to under-perform the NETGEAR. But the stock apears to be less risky and, when comparing its historical volatility, Fomento Economico Mexicano is 1.45 times less risky than NETGEAR. The stock trades about -0.11 of its potential returns per unit of risk. The NETGEAR is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  2,800  in NETGEAR on May 1, 2025 and sell it today you would lose (291.00) from holding NETGEAR or give up 10.39% of portfolio value over 90 days.

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

Fomento Economico Mexicano  vs.  NETGEAR

Fomento Economico

Risk-Adjusted Performance

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.

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Fomento Economico and NETGEAR

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

The idea behind Fomento Economico Mexicano and NETGEAR 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.