Correlation Between IPG Photonics and Primoris Services
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and Primoris Services 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 Primoris Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and Primoris Services, you can compare the effects of market volatilities on IPG Photonics and Primoris Services 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 Primoris Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and Primoris Services.
Diversification Opportunities for IPG Photonics and Primoris Services
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IPG and Primoris is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Primoris Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primoris Services 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 Primoris Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primoris Services has no effect on the direction of IPG Photonics i.e., IPG Photonics and Primoris Services go up and down completely randomly.
Pair Corralation between IPG Photonics and Primoris Services
Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Primoris Services. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 1.08 times less risky than Primoris Services. The stock trades about -0.03 of its potential returns per unit of risk. The Primoris Services is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,126 in Primoris Services on September 2, 2024 and sell it today you would earn a total of 5,245 from holding Primoris Services or generate 167.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IPG Photonics vs. Primoris Services
Performance |
| Timeline |
| IPG Photonics |
| Primoris Services |
IPG Photonics and Primoris Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and Primoris Services
The main advantage of trading using opposite IPG Photonics and Primoris Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, Primoris Services 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 Primoris Services will offset losses from the drop in Primoris Services' long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Entegris |
| Primoris Services vs. MYR Group | Primoris Services vs. Granite Construction Incorporated | Primoris Services vs. Matrix Service Co | Primoris Services vs. Api Group 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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