Correlation Between IPG Photonics and ALK Abell
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and ALK Abell 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 IPG Photonics and ALK Abell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and ALK Abell AS, you can compare the effects of market volatilities on IPG Photonics and ALK Abell 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 IPG Photonics with a short position of ALK Abell. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and ALK Abell.
Diversification Opportunities for IPG Photonics and ALK Abell
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IPG and ALK is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and ALK Abell AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALK Abell AS and IPG Photonics 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 IPG Photonics are associated (or correlated) with ALK Abell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALK Abell AS has no effect on the direction of IPG Photonics i.e., IPG Photonics and ALK Abell go up and down completely randomly.
Pair Corralation between IPG Photonics and ALK Abell
Given the investment horizon of 90 days IPG Photonics is expected to generate 2.11 times more return on investment than ALK Abell. However, IPG Photonics is 2.11 times more volatile than ALK Abell AS. It trades about 0.0 of its potential returns per unit of risk. ALK Abell AS is currently generating about -0.21 per unit of risk. If you would invest 7,463 in IPG Photonics on September 22, 2024 and sell it today you would lose (79.00) from holding IPG Photonics or give up 1.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.73% |
| Values | Daily Returns |
IPG Photonics vs. ALK Abell AS
Performance |
| Timeline |
| IPG Photonics |
| ALK Abell AS |
IPG Photonics and ALK Abell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and ALK Abell
The main advantage of trading using opposite IPG Photonics and ALK Abell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, ALK Abell 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 ALK Abell will offset losses from the drop in ALK Abell's long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| ALK Abell vs. MACOM Technology Solutions | ALK Abell vs. Flexible Solutions International | ALK Abell vs. CF Industries Holdings | ALK Abell vs. IPG Photonics |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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