Correlation Between IPC MEXICO and 3M
Can any of the company-specific risk be diversified away by investing in both IPC MEXICO and 3M 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 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPC MEXICO and 3M Company, you can compare the effects of market volatilities on IPC MEXICO and 3M 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 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPC MEXICO and 3M.
Diversification Opportunities for IPC MEXICO and 3M
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IPC and 3M is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding IPC MEXICO and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company 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 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of IPC MEXICO i.e., IPC MEXICO and 3M go up and down completely randomly.
Pair Corralation between IPC MEXICO and 3M
Assuming the 90 days trading horizon IPC MEXICO is expected to under-perform the 3M. But the index apears to be less risky and, when comparing its historical volatility, IPC MEXICO is 1.57 times less risky than 3M. The index trades about -0.08 of its potential returns per unit of risk. The 3M Company is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 259,800 in 3M Company on September 22, 2024 and sell it today you would lose (1,900) from holding 3M Company or give up 0.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
IPC MEXICO vs. 3M Company
Performance |
| Timeline |
IPC MEXICO and 3M Volatility Contrast
Predicted Return Density |
| Returns |
IPC MEXICO
Pair trading matchups for IPC MEXICO
3M Company
Pair trading matchups for 3M
Pair Trading with IPC MEXICO and 3M
The main advantage of trading using opposite IPC MEXICO and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPC MEXICO position performs unexpectedly, 3M 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 3M will offset losses from the drop in 3M's long position.| IPC MEXICO vs. Grupo Sports World | IPC MEXICO vs. Cognizant Technology Solutions | IPC MEXICO vs. Monster Beverage Corp | IPC MEXICO vs. Genworth Financial |
| 3M vs. Honeywell International | 3M vs. Emerson Electric Co | 3M vs. iShares Global Timber | 3M vs. Vanguard World |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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