Correlation Between Diodes Incorporated and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both Diodes Incorporated 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 Diodes Incorporated and IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diodes Incorporated and IPG Photonics, you can compare the effects of market volatilities on Diodes Incorporated 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 Diodes Incorporated with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diodes Incorporated and IPG Photonics.
Diversification Opportunities for Diodes Incorporated and IPG Photonics
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Diodes and IPG is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Diodes Incorporated and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Diodes Incorporated 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 Diodes Incorporated 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 Diodes Incorporated i.e., Diodes Incorporated and IPG Photonics go up and down completely randomly.
Pair Corralation between Diodes Incorporated and IPG Photonics
Given the investment horizon of 90 days Diodes Incorporated is expected to generate 1.1 times more return on investment than IPG Photonics. However, Diodes Incorporated is 1.1 times more volatile than IPG Photonics. It trades about -0.02 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.03 per unit of risk. If you would invest 9,211 in Diodes Incorporated on August 31, 2024 and sell it today you would lose (2,711) from holding Diodes Incorporated or give up 29.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diodes Incorporated vs. IPG Photonics
Performance |
| Timeline |
| Diodes Incorporated |
| IPG Photonics |
Diodes Incorporated and IPG Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diodes Incorporated and IPG Photonics
The main advantage of trading using opposite Diodes Incorporated and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diodes Incorporated 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.| Diodes Incorporated vs. Silicon Laboratories | Diodes Incorporated vs. MACOM Technology Solutions | Diodes Incorporated vs. FormFactor | Diodes Incorporated vs. Amkor Technology |
| 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.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |