Correlation Between Balchem and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both Balchem and IPG Photonics 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 Balchem and IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balchem and IPG Photonics, you can compare the effects of market volatilities on Balchem and IPG Photonics 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 Balchem with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and IPG Photonics.
Diversification Opportunities for Balchem and IPG Photonics
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Balchem and IPG is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Balchem 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 Balchem are associated (or correlated) with IPG Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPG Photonics has no effect on the direction of Balchem i.e., Balchem and IPG Photonics go up and down completely randomly.
Pair Corralation between Balchem and IPG Photonics
Given the investment horizon of 90 days Balchem is expected to generate 0.66 times more return on investment than IPG Photonics. However, Balchem is 1.51 times less risky than IPG Photonics. It trades about 0.09 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.03 per unit of risk. If you would invest 15,470 in Balchem on September 1, 2024 and sell it today you would earn a total of 2,582 from holding Balchem or generate 16.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balchem vs. IPG Photonics
Performance |
| Timeline |
| Balchem |
| IPG Photonics |
Balchem and IPG Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balchem and IPG Photonics
The main advantage of trading using opposite Balchem and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, IPG Photonics 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 IPG Photonics will offset losses from the drop in IPG Photonics' long position.| Balchem vs. Sensient Technologies | Balchem vs. Innospec | Balchem vs. Minerals Technologies | Balchem vs. Oil Dri |
| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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