Correlation Between IPG Photonics and National Storage
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and National Storage 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 National Storage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and National Storage REIT, you can compare the effects of market volatilities on IPG Photonics and National Storage 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 National Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and National Storage.
Diversification Opportunities for IPG Photonics and National Storage
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IPG and National is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and National Storage REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage REIT 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 National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage REIT has no effect on the direction of IPG Photonics i.e., IPG Photonics and National Storage go up and down completely randomly.
Pair Corralation between IPG Photonics and National Storage
Given the investment horizon of 90 days IPG Photonics is expected to under-perform the National Storage. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 1.49 times less risky than National Storage. The stock trades about -0.04 of its potential returns per unit of risk. The National Storage REIT is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 132.00 in National Storage REIT on November 3, 2024 and sell it today you would earn a total of 12.00 from holding National Storage REIT or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
IPG Photonics vs. National Storage REIT
Performance |
| Timeline |
| IPG Photonics |
| National Storage REIT |
IPG Photonics and National Storage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and National Storage
The main advantage of trading using opposite IPG Photonics and National Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, National Storage 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 National Storage will offset losses from the drop in National Storage's long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| National Storage vs. Goosehead Insurance | National Storage vs. NorthWestern | National Storage vs. Black Hills | National Storage vs. East West Bancorp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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