Can any of the company-specific risk be diversified away by investing in both Weyco and Betterware 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 Weyco and Betterware into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weyco Group and Betterware De Mexico, you can compare the effects of market volatilities on Weyco and Betterware 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 Weyco with a short position of Betterware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weyco and Betterware.
Diversification Opportunities for Weyco and Betterware
The 3 months correlation between Weyco and Betterware is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Weyco Group and Betterware De Mexico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betterware De Mexico and Weyco 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 Weyco Group are associated (or correlated) with Betterware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betterware De Mexico has no effect on the direction of Weyco i.e., Weyco and Betterware go up and down completely randomly.
Given the investment horizon of 90 days Weyco is expected to generate 2.42 times less return on investment than Betterware. But when comparing it to its historical volatility, Weyco Group is 1.9 times less risky than Betterware. It trades about 0.05 of its potential returns per unit of risk. Betterware De Mexico is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,215 in Betterware De Mexico on March 6, 2024 and sell it today you would earn a total of 480.00 from holding Betterware De Mexico or generate 39.51% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Weyco Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Weyco may actually be approaching a critical reversion point that can send shares even higher in July 2024.
Over the last 90 days Betterware De Mexico has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Betterware is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.