Correlation Between Grupo Carso and IPC MEXICO

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

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

Diversification Opportunities for Grupo Carso and IPC MEXICO

0.59

Correlation Coefficient

Grupo Carso  IPC MEXICO

Very weak diversification

The 3 months correlation between Grupo and IPC is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Carso SAB and IPC MEXICO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPC MEXICO and Grupo Carso 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 Grupo Carso SAB are associated (or correlated) with IPC MEXICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPC MEXICO has no effect on the direction of Grupo Carso i.e., Grupo Carso and IPC MEXICO go up and down completely randomly.

Pair Corralation between Grupo Carso and IPC MEXICO

Assuming the 90 days trading horizon Grupo Carso SAB is expected to generate 2.6 times more return on investment than IPC MEXICO. However, Grupo Carso is 2.6 times more volatile than IPC MEXICO. It trades about 0.03 of its potential returns per unit of risk. IPC MEXICO is currently generating about -0.01 per unit of risk. If you would invest  8,816  in Grupo Carso SAB on September 27, 2024 and sell it today you would earn a total of  2,459  from holding Grupo Carso SAB or generate 27.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.02%
Values	Daily Returns

Grupo Carso SAB  vs.  IPC MEXICO

Pair Trading with Grupo Carso and IPC MEXICO

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

The idea behind Grupo Carso SAB and IPC MEXICO 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 Global Correlations module to find global opportunities by holding instruments from different markets.