Correlation Between IPG Photonics and Afya

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

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

Diversification Opportunities for IPG Photonics and Afya

0.4

Correlation Coefficient

IPG Photonics  Afya

Very weak diversification

The 3 months correlation between IPG and Afya is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya and IPG Photonics 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 IPG Photonics are associated (or correlated) with Afya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afya has no effect on the direction of IPG Photonics i.e., IPG Photonics and Afya go up and down completely randomly.

Pair Corralation between IPG Photonics and Afya

Given the investment horizon of 90 days IPG Photonics is expected to generate 1.08 times more return on investment than Afya. However, IPG Photonics is 1.08 times more volatile than Afya. It trades about -0.01 of its potential returns per unit of risk. Afya is currently generating about -0.09 per unit of risk. If you would invest  7,481  in IPG Photonics on September 22, 2024 and sell it today you would lose (97.00) from holding IPG Photonics or give up 1.3% of portfolio value over 90 days.

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

IPG Photonics  vs.  Afya

IPG Photonics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IPG Photonics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, IPG Photonics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 somewhat strong basic indicators, Afya is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IPG Photonics and Afya

The main advantage of trading using opposite IPG Photonics and Afya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, Afya 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 Afya will offset losses from the drop in Afya's long position.

The idea behind IPG Photonics and Afya 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.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.