Correlation Between IPC MEXICO and La Comer

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

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

Diversification Opportunities for IPC MEXICO and La Comer

0.2

Correlation Coefficient

IPC MEXICO  La Comer

Modest diversification

The 3 months correlation between IPC and LACOMERUBC is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding IPC MEXICO and La Comer SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La Comer 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 La Comer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of La Comer SAB has no effect on the direction of IPC MEXICO i.e., IPC MEXICO and La Comer go up and down completely randomly.

Pair Corralation between IPC MEXICO and La Comer

Assuming the 90 days trading horizon IPC MEXICO is expected to generate 0.41 times more return on investment than La Comer. However, IPC MEXICO is 2.41 times less risky than La Comer. It trades about 0.03 of its potential returns per unit of risk. La Comer SAB is currently generating about -0.03 per unit of risk. If you would invest  5,758,181  in IPC MEXICO on January 30, 2024 and sell it today you would earn a total of  25,204  from holding IPC MEXICO or generate 0.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

IPC MEXICO  vs.  La Comer SAB

Pair Trading with IPC MEXICO and La Comer

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

The idea behind IPC MEXICO and La Comer 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.