Correlation Between IPG Photonics and Freedom Bank
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and Freedom Bank 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 Freedom Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and Freedom Bank of, you can compare the effects of market volatilities on IPG Photonics and Freedom Bank 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 Freedom Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and Freedom Bank.
Diversification Opportunities for IPG Photonics and Freedom Bank
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IPG and Freedom is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank 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 Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of IPG Photonics i.e., IPG Photonics and Freedom Bank go up and down completely randomly.
Pair Corralation between IPG Photonics and Freedom Bank
Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Freedom Bank. In addition to that, IPG Photonics is 3.34 times more volatile than Freedom Bank of. It trades about -0.01 of its total potential returns per unit of risk. Freedom Bank of is currently generating about 0.04 per unit of volatility. If you would invest 1,055 in Freedom Bank of on September 3, 2024 and sell it today you would earn a total of 6.00 from holding Freedom Bank of or generate 0.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IPG Photonics vs. Freedom Bank of
Performance |
| Timeline |
| IPG Photonics |
| Freedom Bank |
IPG Photonics and Freedom Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and Freedom Bank
The main advantage of trading using opposite IPG Photonics and Freedom Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, Freedom Bank 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 Freedom Bank will offset losses from the drop in Freedom Bank's long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| Freedom Bank vs. Western Asset Global | Freedom Bank vs. Invesco Trust For | Freedom Bank vs. Logan Ridge Finance | Freedom Bank vs. Invesco Advantage MIT |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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