Correlation Between IPC MEXICO and FIBRA Macquarie

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

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

Diversification Opportunities for IPC MEXICO and FIBRA Macquarie

0.31

Correlation Coefficient

IPC MEXICO  FIBRA Macquarie

Weak diversification

The 3 months correlation between IPC and FIBRA is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding IPC MEXICO and FIBRA Macquarie Mxico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIBRA Macquarie Mxico 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 FIBRA Macquarie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIBRA Macquarie Mxico has no effect on the direction of IPC MEXICO i.e., IPC MEXICO and FIBRA Macquarie go up and down completely randomly.

Pair Corralation between IPC MEXICO and FIBRA Macquarie

Assuming the 90 days trading horizon IPC MEXICO is expected to under-perform the FIBRA Macquarie. But the index apears to be less risky and, when comparing its historical volatility, IPC MEXICO is 1.94 times less risky than FIBRA Macquarie. The index trades about -0.01 of its potential returns per unit of risk. The FIBRA Macquarie Mxico is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,610  in FIBRA Macquarie Mxico on October 11, 2024 and sell it today you would earn a total of  492.00  from holding FIBRA Macquarie Mxico or generate 18.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

IPC MEXICO  vs.  FIBRA Macquarie Mxico

Pair Trading with IPC MEXICO and FIBRA Macquarie

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

The idea behind IPC MEXICO and FIBRA Macquarie Mxico 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.