Correlation Between IShares Core and PEMEX

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

By analyzing existing cross correlation between iShares Core SP and PEMEX PROJ FDG, you can compare the effects of market volatilities on IShares Core and PEMEX 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 IShares Core with a short position of PEMEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and PEMEX.

Diversification Opportunities for IShares Core and PEMEX

-0.31

Correlation Coefficient

IShares Core  PEMEX

Very good diversification

The 3 months correlation between IShares and PEMEX is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and PEMEX PROJ FDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEMEX PROJ FDG and IShares Core 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 iShares Core SP are associated (or correlated) with PEMEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEMEX PROJ FDG has no effect on the direction of IShares Core i.e., IShares Core and PEMEX go up and down completely randomly.

Pair Corralation between IShares Core and PEMEX

Given the investment horizon of 90 days iShares Core SP is expected to generate 0.38 times more return on investment than PEMEX. However, iShares Core SP is 2.61 times less risky than PEMEX. It trades about 0.22 of its potential returns per unit of risk. PEMEX PROJ FDG is currently generating about 0.01 per unit of risk. If you would invest  12,036  in iShares Core SP on August 31, 2024 and sell it today you would earn a total of  1,291  from holding iShares Core SP or generate 10.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

iShares Core SP  vs.  PEMEX PROJ FDG

iShares Core SP

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in December 2024.

PEMEX PROJ FDG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PEMEX PROJ FDG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PEMEX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and PEMEX

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

The idea behind iShares Core SP and PEMEX PROJ FDG 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.