Correlation Between IPC MEXICO and Microsoft

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

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

Diversification Opportunities for IPC MEXICO and Microsoft

0.48

Correlation Coefficient

IPC MEXICO  Microsoft

Very weak diversification

The 3 months correlation between IPC and Microsoft is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding IPC MEXICO and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of IPC MEXICO i.e., IPC MEXICO and Microsoft go up and down completely randomly.

Pair Corralation between IPC MEXICO and Microsoft

Assuming the 90 days trading horizon IPC MEXICO is expected to generate 24.26 times less return on investment than Microsoft. But when comparing it to its historical volatility, IPC MEXICO is 1.93 times less risky than Microsoft. It trades about 0.02 of its potential returns per unit of risk. Microsoft is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  734,246  in Microsoft on April 23, 2025 and sell it today you would earn a total of  217,575  from holding Microsoft or generate 29.63% return on investment over 90 days.

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

IPC MEXICO  vs.  Microsoft

Pair Trading with IPC MEXICO and Microsoft

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

The idea behind IPC MEXICO and Microsoft 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.