Correlation Between IPG Photonics and BW Offshore
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and BW Offshore 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 BW Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and BW Offshore Limited, you can compare the effects of market volatilities on IPG Photonics and BW Offshore 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 BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and BW Offshore.
Diversification Opportunities for IPG Photonics and BW Offshore
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IPG and BWOFY is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and BW Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore Limited 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 BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore Limited has no effect on the direction of IPG Photonics i.e., IPG Photonics and BW Offshore go up and down completely randomly.
Pair Corralation between IPG Photonics and BW Offshore
Given the investment horizon of 90 days IPG Photonics is expected to under-perform the BW Offshore. In addition to that, IPG Photonics is 2.09 times more volatile than BW Offshore Limited. It trades about -0.17 of its total potential returns per unit of risk. BW Offshore Limited is currently generating about -0.06 per unit of volatility. If you would invest 559.00 in BW Offshore Limited on August 30, 2024 and sell it today you would lose (9.00) from holding BW Offshore Limited or give up 1.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
IPG Photonics vs. BW Offshore Limited
Performance |
| Timeline |
| IPG Photonics |
| BW Offshore Limited |
IPG Photonics and BW Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and BW Offshore
The main advantage of trading using opposite IPG Photonics and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, BW Offshore 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 BW Offshore will offset losses from the drop in BW Offshore's long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| BW Offshore vs. Legacy Education | BW Offshore vs. Apple Inc | BW Offshore vs. NVIDIA | BW Offshore vs. Microsoft |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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