Correlation Between IPG Photonics and 126650DF4

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Can any of the company-specific risk be diversified away by investing in both IPG Photonics and 126650DF4 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 126650DF4 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and CVS HEALTH P, you can compare the effects of market volatilities on IPG Photonics and 126650DF4 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 126650DF4. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and 126650DF4.

Diversification Opportunities for IPG Photonics and 126650DF4

-0.45
  Correlation Coefficient

Very good diversification

The 3 months correlation between IPG and 126650DF4 is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and CVS HEALTH P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH P 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 126650DF4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS HEALTH P has no effect on the direction of IPG Photonics i.e., IPG Photonics and 126650DF4 go up and down completely randomly.

Pair Corralation between IPG Photonics and 126650DF4

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the 126650DF4. In addition to that, IPG Photonics is 3.48 times more volatile than CVS HEALTH P. It trades about -0.1 of its total potential returns per unit of risk. CVS HEALTH P is currently generating about -0.17 per unit of volatility. If you would invest  9,675  in CVS HEALTH P on September 2, 2024 and sell it today you would lose (211.00) from holding CVS HEALTH P or give up 2.18% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.24%
ValuesDaily Returns

IPG Photonics  vs.  CVS HEALTH P

 Performance 
       Timeline  
IPG Photonics 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in IPG Photonics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, IPG Photonics reported solid returns over the last few months and may actually be approaching a breakup point.
CVS HEALTH P 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CVS HEALTH P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 126650DF4 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

IPG Photonics and 126650DF4 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IPG Photonics and 126650DF4

The main advantage of trading using opposite IPG Photonics and 126650DF4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, 126650DF4 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 126650DF4 will offset losses from the drop in 126650DF4's long position.
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The idea behind IPG Photonics and CVS HEALTH P pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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