Correlation Between IPG Photonics and Aquestive Therapeutics
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and Aquestive Therapeutics 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 Aquestive Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and Aquestive Therapeutics, you can compare the effects of market volatilities on IPG Photonics and Aquestive Therapeutics 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 Aquestive Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and Aquestive Therapeutics.
Diversification Opportunities for IPG Photonics and Aquestive Therapeutics
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IPG and Aquestive is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Aquestive Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquestive Therapeutics 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 Aquestive Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquestive Therapeutics has no effect on the direction of IPG Photonics i.e., IPG Photonics and Aquestive Therapeutics go up and down completely randomly.
Pair Corralation between IPG Photonics and Aquestive Therapeutics
Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Aquestive Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 1.97 times less risky than Aquestive Therapeutics. The stock trades about -0.17 of its potential returns per unit of risk. The Aquestive Therapeutics is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 566.00 in Aquestive Therapeutics on August 30, 2024 and sell it today you would lose (50.00) from holding Aquestive Therapeutics or give up 8.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IPG Photonics vs. Aquestive Therapeutics
Performance |
| Timeline |
| IPG Photonics |
| Aquestive Therapeutics |
IPG Photonics and Aquestive Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and Aquestive Therapeutics
The main advantage of trading using opposite IPG Photonics and Aquestive Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, Aquestive Therapeutics 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 Aquestive Therapeutics will offset losses from the drop in Aquestive Therapeutics' long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| Aquestive Therapeutics vs. Emergent Biosolutions | Aquestive Therapeutics vs. Bausch Health Companies | Aquestive Therapeutics vs. Neurocrine Biosciences | Aquestive Therapeutics vs. Teva Pharma Industries |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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