Correlation Between IPC MEXICO and NIKE

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

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

Diversification Opportunities for IPC MEXICO and NIKE

-0.02

Correlation Coefficient

IPC MEXICO  NIKE

Good diversification

The 3 months correlation between IPC and NIKE is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding IPC MEXICO and NIKE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIKE Inc 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 NIKE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIKE Inc has no effect on the direction of IPC MEXICO i.e., IPC MEXICO and NIKE go up and down completely randomly.

Pair Corralation between IPC MEXICO and NIKE

Assuming the 90 days trading horizon IPC MEXICO is expected to generate 0.38 times more return on investment than NIKE. However, IPC MEXICO is 2.66 times less risky than NIKE. It trades about 0.16 of its potential returns per unit of risk. NIKE Inc is currently generating about -0.1 per unit of risk. If you would invest  4,933,330  in IPC MEXICO on December 27, 2024 and sell it today you would earn a total of  414,444  from holding IPC MEXICO or generate 8.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

IPC MEXICO  vs.  NIKE Inc

Pair Trading with IPC MEXICO and NIKE

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

The idea behind IPC MEXICO and NIKE Inc 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.