Correlation Between Avadel Pharmaceuticals and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both Avadel Pharmaceuticals 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 Avadel Pharmaceuticals and IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avadel Pharmaceuticals PLC and IPG Photonics, you can compare the effects of market volatilities on Avadel Pharmaceuticals 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 Avadel Pharmaceuticals with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avadel Pharmaceuticals and IPG Photonics.
Diversification Opportunities for Avadel Pharmaceuticals and IPG Photonics
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Avadel and IPG is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Avadel Pharmaceuticals PLC and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Avadel Pharmaceuticals 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 Avadel Pharmaceuticals PLC 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 Avadel Pharmaceuticals i.e., Avadel Pharmaceuticals and IPG Photonics go up and down completely randomly.
Pair Corralation between Avadel Pharmaceuticals and IPG Photonics
Given the investment horizon of 90 days Avadel Pharmaceuticals PLC is expected to under-perform the IPG Photonics. In addition to that, Avadel Pharmaceuticals is 2.01 times more volatile than IPG Photonics. It trades about -0.05 of its total potential returns per unit of risk. IPG Photonics is currently generating about 0.04 per unit of volatility. If you would invest 7,043 in IPG Photonics on September 23, 2024 and sell it today you would earn a total of 341.00 from holding IPG Photonics or generate 4.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Avadel Pharmaceuticals PLC vs. IPG Photonics
Performance |
Timeline |
Avadel Pharmaceuticals |
IPG Photonics |
Avadel Pharmaceuticals and IPG Photonics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Avadel Pharmaceuticals and IPG Photonics
The main advantage of trading using opposite Avadel Pharmaceuticals and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avadel Pharmaceuticals 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.Avadel Pharmaceuticals vs. Oric Pharmaceuticals | Avadel Pharmaceuticals vs. Lyra Therapeutics | Avadel Pharmaceuticals vs. Inhibrx | Avadel Pharmaceuticals vs. ESSA Pharma |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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