Correlation Between IPC MEXICO and Direxion Shares
Can any of the company-specific risk be diversified away by investing in both IPC MEXICO and Direxion Shares 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 Direxion Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPC MEXICO and Direxion Shares ETF, you can compare the effects of market volatilities on IPC MEXICO and Direxion Shares 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 Direxion Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPC MEXICO and Direxion Shares.
Diversification Opportunities for IPC MEXICO and Direxion Shares
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IPC and Direxion is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding IPC MEXICO and Direxion Shares ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Shares ETF 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 Direxion Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Shares ETF has no effect on the direction of IPC MEXICO i.e., IPC MEXICO and Direxion Shares go up and down completely randomly.
Pair Corralation between IPC MEXICO and Direxion Shares
Assuming the 90 days trading horizon IPC MEXICO is expected to under-perform the Direxion Shares. But the index apears to be less risky and, when comparing its historical volatility, IPC MEXICO is 4.07 times less risky than Direxion Shares. The index trades about -0.1 of its potential returns per unit of risk. The Direxion Shares ETF is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 15,619 in Direxion Shares ETF on September 3, 2024 and sell it today you would earn a total of 2,081 from holding Direxion Shares ETF or generate 13.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.01% |
| Values | Daily Returns |
IPC MEXICO vs. Direxion Shares ETF
Performance |
| Timeline |
IPC MEXICO and Direxion Shares Volatility Contrast
Predicted Return Density |
| Returns |
Direxion Shares ETF
Pair trading matchups for Direxion Shares
Pair Trading with IPC MEXICO and Direxion Shares
The main advantage of trading using opposite IPC MEXICO and Direxion Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPC MEXICO position performs unexpectedly, Direxion Shares 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 Direxion Shares will offset losses from the drop in Direxion Shares' long position.The idea behind IPC MEXICO and Direxion Shares ETF 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.| Direxion Shares vs. Vanguard Index Funds | Direxion Shares vs. Vanguard Index Funds | Direxion Shares vs. Vanguard STAR Funds | Direxion Shares vs. SPDR SP 500 |
Check out your portfolio center.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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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