Correlation Between IPC MEXICO and Grupo Simec

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

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

Diversification Opportunities for IPC MEXICO and Grupo Simec

0.45

Correlation Coefficient

IPC MEXICO  Grupo Simec

Very weak diversification

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

Pair Corralation between IPC MEXICO and Grupo Simec

Assuming the 90 days trading horizon IPC MEXICO is expected to under-perform the Grupo Simec. In addition to that, IPC MEXICO is 5.63 times more volatile than Grupo Simec SAB. It trades about -0.04 of its total potential returns per unit of risk. Grupo Simec SAB is currently generating about -0.04 per unit of volatility. If you would invest  18,600  in Grupo Simec SAB on September 27, 2024 and sell it today you would lose (171.00) from holding Grupo Simec SAB or give up 0.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.12%
Values	Daily Returns

IPC MEXICO  vs.  Grupo Simec SAB

Pair Trading with IPC MEXICO and Grupo Simec

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

The idea behind IPC MEXICO and Grupo Simec SAB 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.