Correlation Between Small Cap and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both Small Cap and IPG Photonics 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 Small Cap and IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Premium and IPG Photonics, you can compare the effects of market volatilities on Small Cap and IPG Photonics 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 Small Cap with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and IPG Photonics.
Diversification Opportunities for Small Cap and IPG Photonics
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Small and IPG is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Small Cap 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 Small Cap Premium are associated (or correlated) with IPG Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPG Photonics has no effect on the direction of Small Cap i.e., Small Cap and IPG Photonics go up and down completely randomly.
Pair Corralation between Small Cap and IPG Photonics
Considering the 90-day investment horizon Small Cap Premium is expected to generate 0.22 times more return on investment than IPG Photonics. However, Small Cap Premium is 4.6 times less risky than IPG Photonics. It trades about 0.08 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.02 per unit of risk. If you would invest 2,243 in Small Cap Premium on September 1, 2024 and sell it today you would earn a total of 217.00 from holding Small Cap Premium or generate 9.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Premium vs. IPG Photonics
Performance |
| Timeline |
| Small Cap Premium |
| IPG Photonics |
Small Cap and IPG Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and IPG Photonics
The main advantage of trading using opposite Small Cap and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, IPG Photonics 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 IPG Photonics will offset losses from the drop in IPG Photonics' long position.| Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. First Trust Enhanced | Small Cap vs. Voya Global Advantage |
| 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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