Correlation Between IPG Photonics and Independence Realty

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

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

Diversification Opportunities for IPG Photonics and Independence Realty

0.06

Correlation Coefficient

IPG Photonics  Independence Realty

Significant diversification

The 3 months correlation between IPG and Independence is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Independence Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independence Realty Trust 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 Independence Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independence Realty Trust has no effect on the direction of IPG Photonics i.e., IPG Photonics and Independence Realty go up and down completely randomly.

Pair Corralation between IPG Photonics and Independence Realty

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Independence Realty. In addition to that, IPG Photonics is 1.84 times more volatile than Independence Realty Trust. It trades about -0.02 of its total potential returns per unit of risk. Independence Realty Trust is currently generating about 0.05 per unit of volatility. If you would invest  1,986  in Independence Realty Trust on September 27, 2024 and sell it today you would earn a total of  46.00  from holding Independence Realty Trust or generate 2.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

IPG Photonics  vs.  Independence Realty Trust

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.

Independence Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Independence Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Independence Realty is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IPG Photonics and Independence Realty

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

The idea behind IPG Photonics and Independence Realty Trust 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .