Correlation Between IPG Photonics and BBB Foods
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and BBB Foods 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 BBB Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and BBB Foods, you can compare the effects of market volatilities on IPG Photonics and BBB Foods 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 BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and BBB Foods.
Diversification Opportunities for IPG Photonics and BBB Foods
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IPG and BBB is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods 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 BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of IPG Photonics i.e., IPG Photonics and BBB Foods go up and down completely randomly.
Pair Corralation between IPG Photonics and BBB Foods
Given the investment horizon of 90 days IPG Photonics is expected to under-perform the BBB Foods. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 1.4 times less risky than BBB Foods. The stock trades about -0.03 of its potential returns per unit of risk. The BBB Foods is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,639 in BBB Foods on September 3, 2024 and sell it today you would earn a total of 183.00 from holding BBB Foods or generate 6.93% 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. BBB Foods
Performance |
| Timeline |
| IPG Photonics |
| BBB Foods |
IPG Photonics and BBB Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and BBB Foods
The main advantage of trading using opposite IPG Photonics and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, BBB Foods 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 BBB Foods will offset losses from the drop in BBB Foods' long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| BBB Foods vs. NetSol Technologies | BBB Foods vs. Analog Devices | BBB Foods vs. FARO Technologies | BBB Foods vs. Getty Images Holdings |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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