Correlation Between IPG Photonics and Alvarium Tiedemann

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

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

Diversification Opportunities for IPG Photonics and Alvarium Tiedemann

0.63

Correlation Coefficient

IPG Photonics  Alvarium Tiedemann

Poor diversification

The 3 months correlation between IPG and Alvarium is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Alvarium Tiedemann Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alvarium Tiedemann 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 Alvarium Tiedemann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alvarium Tiedemann has no effect on the direction of IPG Photonics i.e., IPG Photonics and Alvarium Tiedemann go up and down completely randomly.

Pair Corralation between IPG Photonics and Alvarium Tiedemann

Given the investment horizon of 90 days IPG Photonics is expected to generate 4.53 times less return on investment than Alvarium Tiedemann. But when comparing it to its historical volatility, IPG Photonics is 1.42 times less risky than Alvarium Tiedemann. It trades about 0.02 of its potential returns per unit of risk. Alvarium Tiedemann Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  380.00  in Alvarium Tiedemann Holdings on September 27, 2024 and sell it today you would earn a total of  50.00  from holding Alvarium Tiedemann Holdings or generate 13.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

IPG Photonics  vs.  Alvarium Tiedemann Holdings

IPG Photonics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IPG Photonics are ranked lower than 1 (%) 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.

Alvarium Tiedemann

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alvarium Tiedemann Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Alvarium Tiedemann demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IPG Photonics and Alvarium Tiedemann

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

The idea behind IPG Photonics and Alvarium Tiedemann Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.