Correlation Between Freedom Bank and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both Freedom Bank 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 Freedom Bank and IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freedom Bank of and IPG Photonics, you can compare the effects of market volatilities on Freedom Bank 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 Freedom Bank with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom Bank and IPG Photonics.
Diversification Opportunities for Freedom Bank and IPG Photonics
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Freedom and IPG is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Bank of and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Freedom Bank 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 Freedom Bank of 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 Freedom Bank i.e., Freedom Bank and IPG Photonics go up and down completely randomly.
Pair Corralation between Freedom Bank and IPG Photonics
Given the investment horizon of 90 days Freedom Bank of is expected to generate 0.48 times more return on investment than IPG Photonics. However, Freedom Bank of is 2.1 times less risky than IPG Photonics. It trades about -0.01 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.02 per unit of risk. If you would invest 1,095 in Freedom Bank of on September 3, 2024 and sell it today you would lose (34.00) from holding Freedom Bank of or give up 3.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 76.77% |
| Values | Daily Returns |
Freedom Bank of vs. IPG Photonics
Performance |
| Timeline |
| Freedom Bank |
| IPG Photonics |
Freedom Bank and IPG Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freedom Bank and IPG Photonics
The main advantage of trading using opposite Freedom Bank and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Bank 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.| Freedom Bank vs. Western Asset Global | Freedom Bank vs. Invesco Trust For | Freedom Bank vs. Logan Ridge Finance | Freedom Bank vs. Invesco Advantage MIT |
| 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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