Correlation Between IPG Photonics and Arm Holdings
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and Arm Holdings 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 Arm Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and Arm Holdings plc, you can compare the effects of market volatilities on IPG Photonics and Arm Holdings 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 Arm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and Arm Holdings.
Diversification Opportunities for IPG Photonics and Arm Holdings
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IPG and Arm is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc 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 Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of IPG Photonics i.e., IPG Photonics and Arm Holdings go up and down completely randomly.
Pair Corralation between IPG Photonics and Arm Holdings
Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Arm Holdings. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 2.22 times less risky than Arm Holdings. The stock trades about -0.02 of its potential returns per unit of risk. The Arm Holdings plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 6,359 in Arm Holdings plc on November 2, 2024 and sell it today you would earn a total of 8,964 from holding Arm Holdings plc or generate 140.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 70.24% |
| Values | Daily Returns |
IPG Photonics vs. Arm Holdings plc
Performance |
| Timeline |
| IPG Photonics |
| Arm Holdings plc |
IPG Photonics and Arm Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and Arm Holdings
The main advantage of trading using opposite IPG Photonics and Arm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, Arm Holdings 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 Arm Holdings will offset losses from the drop in Arm Holdings' long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| Arm Holdings vs. BioNTech SE | Arm Holdings vs. Kuya Silver | Arm Holdings vs. Nicola Mining | Arm Holdings vs. Tarsus Pharmaceuticals |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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