Correlation Between IPC MEXICO and Visa

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

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

Diversification Opportunities for IPC MEXICO and Visa

-0.77

Correlation Coefficient

IPC MEXICO  Visa

Pay attention - limited upside

The 3 months correlation between IPC and Visa is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding IPC MEXICO and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of IPC MEXICO i.e., IPC MEXICO and Visa go up and down completely randomly.

Pair Corralation between IPC MEXICO and Visa

Assuming the 90 days trading horizon IPC MEXICO is expected to generate 19.95 times less return on investment than Visa. But when comparing it to its historical volatility, IPC MEXICO is 1.43 times less risky than Visa. It trades about 0.01 of its potential returns per unit of risk. Visa Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  416,209  in Visa Inc on September 24, 2024 and sell it today you would earn a total of  222,291  from holding Visa Inc or generate 53.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.31%
Values	Daily Returns

IPC MEXICO  vs.  Visa Inc

Pair Trading with IPC MEXICO and Visa

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

The idea behind IPC MEXICO and Visa 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..