Correlation Between IPG Photonics and Viavi Solutions
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and Viavi Solutions 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 Viavi Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and Viavi Solutions, you can compare the effects of market volatilities on IPG Photonics and Viavi Solutions 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 Viavi Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and Viavi Solutions.
Diversification Opportunities for IPG Photonics and Viavi Solutions
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IPG and Viavi is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Viavi Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viavi Solutions 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 Viavi Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viavi Solutions has no effect on the direction of IPG Photonics i.e., IPG Photonics and Viavi Solutions go up and down completely randomly.
Pair Corralation between IPG Photonics and Viavi Solutions
Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Viavi Solutions. In addition to that, IPG Photonics is 1.16 times more volatile than Viavi Solutions. It trades about -0.02 of its total potential returns per unit of risk. Viavi Solutions is currently generating about 0.2 per unit of volatility. If you would invest 925.00 in Viavi Solutions on August 27, 2024 and sell it today you would earn a total of 93.00 from holding Viavi Solutions or generate 10.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
IPG Photonics vs. Viavi Solutions
Performance |
| Timeline |
| IPG Photonics |
| Viavi Solutions |
IPG Photonics and Viavi Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and Viavi Solutions
The main advantage of trading using opposite IPG Photonics and Viavi Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, Viavi Solutions 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 Viavi Solutions will offset losses from the drop in Viavi Solutions' long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| Viavi Solutions vs. Ichor Holdings | Viavi Solutions vs. Fabrinet | Viavi Solutions vs. Hello Group | Viavi Solutions vs. Ultra Clean 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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