Correlation Between IPC MEXICO and Bolsa Mexicana

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

By analyzing existing cross correlation between IPC MEXICO and Bolsa Mexicana de, you can compare the effects of market volatilities on IPC MEXICO and Bolsa Mexicana 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 IPC MEXICO with a short position of Bolsa Mexicana. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPC MEXICO and Bolsa Mexicana.

Diversification Opportunities for IPC MEXICO and Bolsa Mexicana

-0.29

Correlation Coefficient

IPC MEXICO  Bolsa Mexicana

Very good diversification

The 3 months correlation between IPC and Bolsa is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding IPC MEXICO and Bolsa Mexicana de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bolsa Mexicana de and IPC MEXICO 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 IPC MEXICO are associated (or correlated) with Bolsa Mexicana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bolsa Mexicana de has no effect on the direction of IPC MEXICO i.e., IPC MEXICO and Bolsa Mexicana go up and down completely randomly.

Pair Corralation between IPC MEXICO and Bolsa Mexicana

Assuming the 90 days trading horizon IPC MEXICO is expected to under-perform the Bolsa Mexicana. But the index apears to be less risky and, when comparing its historical volatility, IPC MEXICO is 2.47 times less risky than Bolsa Mexicana. The index trades about -0.13 of its potential returns per unit of risk. The Bolsa Mexicana de is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,248  in Bolsa Mexicana de on September 26, 2024 and sell it today you would earn a total of  117.00  from holding Bolsa Mexicana de or generate 3.6% return on investment over 90 days.

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

IPC MEXICO  vs.  Bolsa Mexicana de

Pair Trading with IPC MEXICO and Bolsa Mexicana

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

The idea behind IPC MEXICO and Bolsa Mexicana de 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.