Correlation Between IPG Photonics and Kaiser Aluminum
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and Kaiser Aluminum 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 Kaiser Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and Kaiser Aluminum, you can compare the effects of market volatilities on IPG Photonics and Kaiser Aluminum 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 Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and Kaiser Aluminum.
Diversification Opportunities for IPG Photonics and Kaiser Aluminum
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IPG and Kaiser is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of IPG Photonics i.e., IPG Photonics and Kaiser Aluminum go up and down completely randomly.
Pair Corralation between IPG Photonics and Kaiser Aluminum
Given the investment horizon of 90 days IPG Photonics is expected to generate 0.82 times more return on investment than Kaiser Aluminum. However, IPG Photonics is 1.22 times less risky than Kaiser Aluminum. It trades about -0.03 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about -0.03 per unit of risk. If you would invest 8,710 in IPG Photonics on September 1, 2024 and sell it today you would lose (906.00) from holding IPG Photonics or give up 10.4% 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. Kaiser Aluminum
Performance |
| Timeline |
| IPG Photonics |
| Kaiser Aluminum |
IPG Photonics and Kaiser Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and Kaiser Aluminum
The main advantage of trading using opposite IPG Photonics and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, Kaiser Aluminum 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| Kaiser Aluminum vs. Century Aluminum | Kaiser Aluminum vs. China Hongqiao Group | Kaiser Aluminum vs. Constellium Nv | Kaiser Aluminum vs. Alcoa Corp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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