Correlation Between Bel Fuse and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both Bel Fuse 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 Bel Fuse and IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bel Fuse A and IPG Photonics, you can compare the effects of market volatilities on Bel Fuse 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 Bel Fuse with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bel Fuse and IPG Photonics.
Diversification Opportunities for Bel Fuse and IPG Photonics
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bel and IPG is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bel Fuse A and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Bel Fuse 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 Bel Fuse A 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 Bel Fuse i.e., Bel Fuse and IPG Photonics go up and down completely randomly.
Pair Corralation between Bel Fuse and IPG Photonics
Assuming the 90 days horizon Bel Fuse A is expected to under-perform the IPG Photonics. But the stock apears to be less risky and, when comparing its historical volatility, Bel Fuse A is 1.35 times less risky than IPG Photonics. The stock trades about -0.13 of its potential returns per unit of risk. The IPG Photonics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 7,927 in IPG Photonics on August 28, 2024 and sell it today you would lose (35.00) from holding IPG Photonics or give up 0.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bel Fuse A vs. IPG Photonics
Performance |
| Timeline |
| Bel Fuse A |
| IPG Photonics |
Bel Fuse and IPG Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bel Fuse and IPG Photonics
The main advantage of trading using opposite Bel Fuse and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bel Fuse 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.| Bel Fuse vs. Richardson Electronics | Bel Fuse vs. LSI Industries | Bel Fuse vs. Benchmark Electronics | Bel Fuse vs. Plexus Corp |
| 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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