Correlation Between IPG Photonics and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and Cincinnati Financial 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 Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and Cincinnati Financial, you can compare the effects of market volatilities on IPG Photonics and Cincinnati Financial 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 Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and Cincinnati Financial.
Diversification Opportunities for IPG Photonics and Cincinnati Financial
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IPG and Cincinnati is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial 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 Cincinnati Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cincinnati Financial has no effect on the direction of IPG Photonics i.e., IPG Photonics and Cincinnati Financial go up and down completely randomly.
Pair Corralation between IPG Photonics and Cincinnati Financial
Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Cincinnati Financial. In addition to that, IPG Photonics is 1.53 times more volatile than Cincinnati Financial. It trades about -0.03 of its total potential returns per unit of risk. Cincinnati Financial is currently generating about 0.03 per unit of volatility. If you would invest 13,545 in Cincinnati Financial on November 28, 2024 and sell it today you would earn a total of 449.00 from holding Cincinnati Financial or generate 3.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IPG Photonics vs. Cincinnati Financial
Performance |
| Timeline |
| IPG Photonics |
| Cincinnati Financial |
IPG Photonics and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and Cincinnati Financial
The main advantage of trading using opposite IPG Photonics and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, Cincinnati Financial 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 Cincinnati Financial will offset losses from the drop in Cincinnati Financial's long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. The Travelers Companies | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. W R Berkley |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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