Correlation Between IPC MEXICO and Pfizer

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

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

Diversification Opportunities for IPC MEXICO and Pfizer

0.45

Correlation Coefficient

IPC MEXICO  Pfizer

Very weak diversification

The 3 months correlation between IPC and Pfizer is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding IPC MEXICO and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer 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 Pfizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfizer Inc has no effect on the direction of IPC MEXICO i.e., IPC MEXICO and Pfizer go up and down completely randomly.

Pair Corralation between IPC MEXICO and Pfizer

Assuming the 90 days trading horizon IPC MEXICO is expected to under-perform the Pfizer. But the index apears to be less risky and, when comparing its historical volatility, IPC MEXICO is 2.03 times less risky than Pfizer. The index trades about -0.23 of its potential returns per unit of risk. The Pfizer Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  52,701  in Pfizer Inc on October 9, 2024 and sell it today you would earn a total of  2,000  from holding Pfizer Inc or generate 3.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.0%
Values	Daily Returns

IPC MEXICO  vs.  Pfizer Inc

Pair Trading with IPC MEXICO and Pfizer

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

The idea behind IPC MEXICO and Pfizer 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.