Correlation Between IPC MEXICO and Merck
Can any of the company-specific risk be diversified away by investing in both IPC MEXICO and Merck 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 Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPC MEXICO and Merck Company, you can compare the effects of market volatilities on IPC MEXICO and Merck 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 Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPC MEXICO and Merck.
Diversification Opportunities for IPC MEXICO and Merck
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IPC and Merck is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding IPC MEXICO and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck 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 Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of IPC MEXICO i.e., IPC MEXICO and Merck go up and down completely randomly.
Pair Corralation between IPC MEXICO and Merck
Assuming the 90 days trading horizon IPC MEXICO is expected to under-perform the Merck. But the index apears to be less risky and, when comparing its historical volatility, IPC MEXICO is 1.8 times less risky than Merck. The index trades about -0.01 of its potential returns per unit of risk. The Merck Company is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 207,717 in Merck Company on August 31, 2024 and sell it today you would earn a total of 3,783 from holding Merck Company or generate 1.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.74% |
| Values | Daily Returns |
IPC MEXICO vs. Merck Company
Performance |
| Timeline |
IPC MEXICO and Merck Volatility Contrast
Predicted Return Density |
| Returns |
IPC MEXICO
Pair trading matchups for IPC MEXICO
Merck Company
Pair trading matchups for Merck
Pair Trading with IPC MEXICO and Merck
The main advantage of trading using opposite IPC MEXICO and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPC MEXICO position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.| IPC MEXICO vs. Genworth Financial | IPC MEXICO vs. Cognizant Technology Solutions | IPC MEXICO vs. CVS Health | IPC MEXICO vs. First Republic Bank |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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