Correlation Between IPG Photonics and Nextera Energy
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and Nextera Energy 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 Nextera Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and Nextera Energy, you can compare the effects of market volatilities on IPG Photonics and Nextera Energy 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 Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and Nextera Energy.
Diversification Opportunities for IPG Photonics and Nextera Energy
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IPG and Nextera is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy 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 Nextera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextera Energy has no effect on the direction of IPG Photonics i.e., IPG Photonics and Nextera Energy go up and down completely randomly.
Pair Corralation between IPG Photonics and Nextera Energy
Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Nextera Energy. In addition to that, IPG Photonics is 1.37 times more volatile than Nextera Energy. It trades about 0.0 of its total potential returns per unit of risk. Nextera Energy is currently generating about 0.0 per unit of volatility. If you would invest 7,938 in Nextera Energy on September 14, 2024 and sell it today you would lose (578.50) from holding Nextera Energy or give up 7.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IPG Photonics vs. Nextera Energy
Performance |
| Timeline |
| IPG Photonics |
| Nextera Energy |
IPG Photonics and Nextera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and Nextera Energy
The main advantage of trading using opposite IPG Photonics and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, Nextera Energy 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 Nextera Energy will offset losses from the drop in Nextera Energy's long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| Nextera Energy vs. Cementos Pacasmayo SAA | Nextera Energy vs. Stepan Company | Nextera Energy vs. IPG Photonics | Nextera Energy vs. Flexible Solutions International |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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