Correlation Between IPG Photonics and Jacobs Solutions

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

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

Diversification Opportunities for IPG Photonics and Jacobs Solutions

0.59

Correlation Coefficient

IPG Photonics  Jacobs Solutions

Very weak diversification

The 3 months correlation between IPG and Jacobs is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions 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 Jacobs Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacobs Solutions has no effect on the direction of IPG Photonics i.e., IPG Photonics and Jacobs Solutions go up and down completely randomly.

Pair Corralation between IPG Photonics and Jacobs Solutions

Given the investment horizon of 90 days IPG Photonics is expected to generate 1.13 times less return on investment than Jacobs Solutions. In addition to that, IPG Photonics is 1.5 times more volatile than Jacobs Solutions. It trades about 0.03 of its total potential returns per unit of risk. Jacobs Solutions is currently generating about 0.05 per unit of volatility. If you would invest  13,063  in Jacobs Solutions on September 28, 2024 and sell it today you would earn a total of  561.00  from holding Jacobs Solutions or generate 4.29% return on investment over 90 days.

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

IPG Photonics  vs.  Jacobs Solutions

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.

Jacobs Solutions

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady forward-looking indicators, Jacobs Solutions is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with IPG Photonics and Jacobs Solutions

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

The idea behind IPG Photonics and Jacobs Solutions 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.