Correlation Between IPG Photonics and Pearson PLC
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and Pearson PLC 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 Pearson PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and Pearson PLC ADR, you can compare the effects of market volatilities on IPG Photonics and Pearson PLC 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 Pearson PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and Pearson PLC.
Diversification Opportunities for IPG Photonics and Pearson PLC
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IPG and Pearson is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Pearson PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson PLC ADR 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 Pearson PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearson PLC ADR has no effect on the direction of IPG Photonics i.e., IPG Photonics and Pearson PLC go up and down completely randomly.
Pair Corralation between IPG Photonics and Pearson PLC
Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Pearson PLC. In addition to that, IPG Photonics is 2.02 times more volatile than Pearson PLC ADR. It trades about -0.06 of its total potential returns per unit of risk. Pearson PLC ADR is currently generating about 0.22 per unit of volatility. If you would invest 1,490 in Pearson PLC ADR on September 4, 2024 and sell it today you would earn a total of 78.00 from holding Pearson PLC ADR or generate 5.23% 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. Pearson PLC ADR
Performance |
| Timeline |
| IPG Photonics |
| Pearson PLC ADR |
IPG Photonics and Pearson PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and Pearson PLC
The main advantage of trading using opposite IPG Photonics and Pearson PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, Pearson PLC 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 Pearson PLC will offset losses from the drop in Pearson PLC's long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| Pearson PLC vs. John Wiley Sons | Pearson PLC vs. New York Times | Pearson PLC vs. Lee Enterprises Incorporated | Pearson PLC vs. Gannett Co |
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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