Correlation Between Western Union and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both Western Union 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 Western Union and IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Union Co and IPG Photonics, you can compare the effects of market volatilities on Western Union 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 Western Union with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Union and IPG Photonics.
Diversification Opportunities for Western Union and IPG Photonics
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and IPG is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Western Union 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 Western Union Co 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 Western Union i.e., Western Union and IPG Photonics go up and down completely randomly.
Pair Corralation between Western Union and IPG Photonics
Allowing for the 90-day total investment horizon Western Union Co is expected to generate 0.43 times more return on investment than IPG Photonics. However, Western Union Co is 2.3 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 -0.17 per unit of risk. If you would invest 1,084 in Western Union Co on August 30, 2024 and sell it today you would earn a total of 18.00 from holding Western Union Co or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Union Co vs. IPG Photonics
Performance |
| Timeline |
| Western Union |
| IPG Photonics |
Western Union and IPG Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Union and IPG Photonics
The main advantage of trading using opposite Western Union and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Union 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.| Western Union vs. Navient Corp | Western Union vs. Green Dot | Western Union vs. Orix Corp Ads | Western Union vs. FirstCash |
| 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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