Correlation Between IPG Photonics and Tower Semiconductor
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and Tower Semiconductor 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 Tower Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and Tower Semiconductor, you can compare the effects of market volatilities on IPG Photonics and Tower Semiconductor 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 Tower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and Tower Semiconductor.
Diversification Opportunities for IPG Photonics and Tower Semiconductor
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IPG and Tower is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor 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 Tower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Semiconductor has no effect on the direction of IPG Photonics i.e., IPG Photonics and Tower Semiconductor go up and down completely randomly.
Pair Corralation between IPG Photonics and Tower Semiconductor
Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Tower Semiconductor. In addition to that, IPG Photonics is 1.01 times more volatile than Tower Semiconductor. It trades about -0.03 of its total potential returns per unit of risk. Tower Semiconductor is currently generating about 0.11 per unit of volatility. If you would invest 2,786 in Tower Semiconductor on August 25, 2024 and sell it today you would earn a total of 1,997 from holding Tower Semiconductor or generate 71.68% 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. Tower Semiconductor
Performance |
| Timeline |
| IPG Photonics |
| Tower Semiconductor |
IPG Photonics and Tower Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and Tower Semiconductor
The main advantage of trading using opposite IPG Photonics and Tower Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, Tower Semiconductor 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 Tower Semiconductor will offset losses from the drop in Tower Semiconductor's long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| Tower Semiconductor vs. Teradyne | Tower Semiconductor vs. IPG Photonics | Tower Semiconductor vs. Applied Materials |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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