Correlation Between Afya and IPG Photonics

Can any of the company-specific risk be diversified away by investing in both Afya 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 Afya and IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Afya and IPG Photonics, you can compare the effects of market volatilities on Afya 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 Afya with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Afya and IPG Photonics.

Diversification Opportunities for Afya and IPG Photonics

0.43

Correlation Coefficient

Afya  IPG Photonics

Very weak diversification

The 3 months correlation between Afya and IPG is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Afya and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Afya 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 Afya 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 Afya i.e., Afya and IPG Photonics go up and down completely randomly.

Pair Corralation between Afya and IPG Photonics

Given the investment horizon of 90 days Afya is expected to generate 1.03 times more return on investment than IPG Photonics. However, Afya is 1.03 times more volatile than IPG Photonics. It trades about 0.01 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.02 per unit of risk. If you would invest  1,539  in Afya on October 1, 2024 and sell it today you would earn a total of  46.00  from holding Afya or generate 2.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Afya  vs.  IPG Photonics

Afya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

IPG Photonics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IPG Photonics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, IPG Photonics is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Afya and IPG Photonics

The main advantage of trading using opposite Afya and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Afya 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.

The idea behind Afya and IPG Photonics 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.