Correlation Between Cool and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both Cool 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 Cool and IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cool Company and IPG Photonics, you can compare the effects of market volatilities on Cool 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 Cool with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cool and IPG Photonics.
Diversification Opportunities for Cool and IPG Photonics
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cool and IPG is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Cool Company and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Cool 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 Cool Company 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 Cool i.e., Cool and IPG Photonics go up and down completely randomly.
Pair Corralation between Cool and IPG Photonics
Given the investment horizon of 90 days Cool Company is expected to under-perform the IPG Photonics. In addition to that, Cool is 1.6 times more volatile than IPG Photonics. It trades about -0.47 of its total potential returns per unit of risk. IPG Photonics is currently generating about 0.06 per unit of volatility. If you would invest 7,639 in IPG Photonics on September 14, 2024 and sell it today you would earn a total of 173.00 from holding IPG Photonics or generate 2.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cool Company vs. IPG Photonics
Performance |
| Timeline |
| Cool Company |
| IPG Photonics |
Cool and IPG Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cool and IPG Photonics
The main advantage of trading using opposite Cool and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cool 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.| Cool vs. Century Aluminum | Cool vs. Cedar Realty Trust | Cool vs. Coupang LLC | Cool vs. SunLink Health Systems |
| 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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