Correlation Between IPC MEXICO and FIBRA Prologis

Can any of the company-specific risk be diversified away by investing in both IPC MEXICO and FIBRA Prologis 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 Prologis 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 Prologis, you can compare the effects of market volatilities on IPC MEXICO and FIBRA Prologis 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 Prologis. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPC MEXICO and FIBRA Prologis.

Diversification Opportunities for IPC MEXICO and FIBRA Prologis

0.5

Correlation Coefficient

IPC MEXICO  FIBRA Prologis

Very weak diversification

The 3 months correlation between IPC and FIBRA is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding IPC MEXICO and FIBRA Prologis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIBRA Prologis 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 Prologis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIBRA Prologis has no effect on the direction of IPC MEXICO i.e., IPC MEXICO and FIBRA Prologis go up and down completely randomly.

Pair Corralation between IPC MEXICO and FIBRA Prologis

Assuming the 90 days trading horizon IPC MEXICO is expected to generate 0.49 times more return on investment than FIBRA Prologis. However, IPC MEXICO is 2.04 times less risky than FIBRA Prologis. It trades about 0.01 of its potential returns per unit of risk. FIBRA Prologis is currently generating about -0.06 per unit of risk. If you would invest  5,116,629  in IPC MEXICO on October 26, 2024 and sell it today you would earn a total of  15,699  from holding IPC MEXICO or generate 0.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

IPC MEXICO  vs.  FIBRA Prologis

Pair Trading with IPC MEXICO and FIBRA Prologis

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

The idea behind IPC MEXICO and FIBRA Prologis 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.