Correlation Between IPC MEXICO and Bank of America

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

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

Diversification Opportunities for IPC MEXICO and Bank of America

0.01

Correlation Coefficient

IPC MEXICO  Bank of America

Significant diversification

The 3 months correlation between IPC and Bank is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding IPC MEXICO and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of IPC MEXICO i.e., IPC MEXICO and Bank of America go up and down completely randomly.

Pair Corralation between IPC MEXICO and Bank of America

Assuming the 90 days trading horizon IPC MEXICO is expected to generate 0.5 times more return on investment than Bank of America. However, IPC MEXICO is 1.98 times less risky than Bank of America. It trades about 0.16 of its potential returns per unit of risk. Bank of America is currently generating about -0.02 per unit of risk. If you would invest  4,929,058  in IPC MEXICO on December 26, 2024 and sell it today you would earn a total of  390,663  from holding IPC MEXICO or generate 7.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

IPC MEXICO  vs.  Bank of America

Pair Trading with IPC MEXICO and Bank of America

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

The idea behind IPC MEXICO and Bank of America 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .