Correlation Between Sumitomo Electric and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both Sumitomo Electric 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 Sumitomo Electric and IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Electric Industries and IPG Photonics, you can compare the effects of market volatilities on Sumitomo Electric 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 Sumitomo Electric with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Electric and IPG Photonics.
Diversification Opportunities for Sumitomo Electric and IPG Photonics
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and IPG is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Electric Industries and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Sumitomo Electric 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 Sumitomo Electric Industries 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 Sumitomo Electric i.e., Sumitomo Electric and IPG Photonics go up and down completely randomly.
Pair Corralation between Sumitomo Electric and IPG Photonics
Assuming the 90 days horizon Sumitomo Electric Industries is expected to generate 0.54 times more return on investment than IPG Photonics. However, Sumitomo Electric Industries is 1.87 times less risky than IPG Photonics. It trades about 0.09 of its potential returns per unit of risk. IPG Photonics is currently generating about 0.0 per unit of risk. If you would invest 997.00 in Sumitomo Electric Industries on August 30, 2024 and sell it today you would earn a total of 660.00 from holding Sumitomo Electric Industries or generate 66.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Electric Industries vs. IPG Photonics
Performance |
| Timeline |
| Sumitomo Electric |
| IPG Photonics |
Sumitomo Electric and IPG Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Electric and IPG Photonics
The main advantage of trading using opposite Sumitomo Electric and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Electric 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.| Sumitomo Electric vs. Analog Devices | Sumitomo Electric vs. Microchip Technology | Sumitomo Electric vs. IPG Photonics | Sumitomo Electric vs. Marti Technologies |
| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences |