Correlation Between IPC MEXICO and Honeywell International

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

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

Diversification Opportunities for IPC MEXICO and Honeywell International

-0.78

Correlation Coefficient

IPC MEXICO  Honeywell International

Pay attention - limited upside

The 3 months correlation between IPC and Honeywell is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding IPC MEXICO and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International 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 Honeywell International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell International has no effect on the direction of IPC MEXICO i.e., IPC MEXICO and Honeywell International go up and down completely randomly.

Pair Corralation between IPC MEXICO and Honeywell International

Assuming the 90 days trading horizon IPC MEXICO is expected to generate 0.48 times more return on investment than Honeywell International. However, IPC MEXICO is 2.09 times less risky than Honeywell International. It trades about 0.15 of its potential returns per unit of risk. Honeywell International is currently generating about -0.07 per unit of risk. If you would invest  4,951,327  in IPC MEXICO on December 28, 2024 and sell it today you would earn a total of  396,447  from holding IPC MEXICO or generate 8.01% return on investment over 90 days.

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

IPC MEXICO  vs.  Honeywell International

Pair Trading with IPC MEXICO and Honeywell International

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

The idea behind IPC MEXICO and Honeywell International 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.