Correlation Between IPC MEXICO and Basic Materials
Can any of the company-specific risk be diversified away by investing in both IPC MEXICO and Basic Materials 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 Basic Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPC MEXICO and Basic Materials, you can compare the effects of market volatilities on IPC MEXICO and Basic Materials 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 Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPC MEXICO and Basic Materials.
Diversification Opportunities for IPC MEXICO and Basic Materials
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between IPC and Basic is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding IPC MEXICO and Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials 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 Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of IPC MEXICO i.e., IPC MEXICO and Basic Materials go up and down completely randomly.
Pair Corralation between IPC MEXICO and Basic Materials
Assuming the 90 days trading horizon IPC MEXICO is expected to generate 0.84 times more return on investment than Basic Materials. However, IPC MEXICO is 1.19 times less risky than Basic Materials. It trades about -0.07 of its potential returns per unit of risk. Basic Materials is currently generating about -0.25 per unit of risk. If you would invest 5,758,181 in IPC MEXICO on February 1, 2024 and sell it today you would lose (85,383) from holding IPC MEXICO or give up 1.48% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
IPC MEXICO vs. Basic Materials
Performance |
Timeline |
IPC MEXICO and Basic Materials Volatility Contrast
Predicted Return Density |
Returns |
IPC MEXICO
Pair trading matchups for IPC MEXICO
Basic Materials
Pair trading matchups for Basic Materials
Pair Trading with IPC MEXICO and Basic Materials
The main advantage of trading using opposite IPC MEXICO and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPC MEXICO position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.IPC MEXICO vs. Applied Materials | IPC MEXICO vs. The Bank of | IPC MEXICO vs. Capital One Financial | IPC MEXICO vs. Air Transport Services |
Basic Materials vs. MAHLE Metal Leve | Basic Materials vs. NXP Semiconductors NV | Basic Materials vs. Align Technology | Basic Materials vs. Metalfrio Solutions SA |
Check out your portfolio center.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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