Correlation Between IPG Photonics and Entravision Communications
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and Entravision Communications 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 Entravision Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and Entravision Communications, you can compare the effects of market volatilities on IPG Photonics and Entravision Communications 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 Entravision Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and Entravision Communications.
Diversification Opportunities for IPG Photonics and Entravision Communications
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IPG and Entravision is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications 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 Entravision Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entravision Communications has no effect on the direction of IPG Photonics i.e., IPG Photonics and Entravision Communications go up and down completely randomly.
Pair Corralation between IPG Photonics and Entravision Communications
Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Entravision Communications. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 1.73 times less risky than Entravision Communications. The stock trades about -0.03 of its potential returns per unit of risk. The Entravision Communications is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 450.00 in Entravision Communications on August 29, 2024 and sell it today you would lose (217.00) from holding Entravision Communications or give up 48.22% 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. Entravision Communications
Performance |
| Timeline |
| IPG Photonics |
| Entravision Communications |
IPG Photonics and Entravision Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and Entravision Communications
The main advantage of trading using opposite IPG Photonics and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, Entravision Communications 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 Entravision Communications will offset losses from the drop in Entravision Communications' long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| Entravision Communications vs. Marchex | Entravision Communications vs. Direct Digital Holdings | Entravision Communications vs. Cimpress NV | Entravision Communications vs. Townsquare Media |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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