Correlation Between IPG Photonics and SFL
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and SFL 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 SFL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and SFL Corporation, you can compare the effects of market volatilities on IPG Photonics and SFL 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 SFL. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and SFL.
Diversification Opportunities for IPG Photonics and SFL
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IPG and SFL is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and SFL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFL Corporation 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 SFL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFL Corporation has no effect on the direction of IPG Photonics i.e., IPG Photonics and SFL go up and down completely randomly.
Pair Corralation between IPG Photonics and SFL
Given the investment horizon of 90 days IPG Photonics is expected to under-perform the SFL. In addition to that, IPG Photonics is 1.44 times more volatile than SFL Corporation. It trades about -0.01 of its total potential returns per unit of risk. SFL Corporation is currently generating about 0.35 per unit of volatility. If you would invest 999.00 in SFL Corporation on October 22, 2024 and sell it today you would earn a total of 85.00 from holding SFL Corporation or generate 8.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IPG Photonics vs. SFL Corp.
Performance |
| Timeline |
| IPG Photonics |
| SFL Corporation |
IPG Photonics and SFL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and SFL
The main advantage of trading using opposite IPG Photonics and SFL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, SFL 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 SFL will offset losses from the drop in SFL's long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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