Correlation Between IPG Photonics and Papaya Growth

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

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

Diversification Opportunities for IPG Photonics and Papaya Growth

-0.02

Correlation Coefficient

IPG Photonics  Papaya Growth

Good diversification

The 3 months correlation between IPG and Papaya is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Papaya Growth Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papaya Growth Opportunity 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 Papaya Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papaya Growth Opportunity has no effect on the direction of IPG Photonics i.e., IPG Photonics and Papaya Growth go up and down completely randomly.

Pair Corralation between IPG Photonics and Papaya Growth

Given the investment horizon of 90 days IPG Photonics is expected to generate 4.58 times more return on investment than Papaya Growth. However, IPG Photonics is 4.58 times more volatile than Papaya Growth Opportunity. It trades about 0.02 of its potential returns per unit of risk. Papaya Growth Opportunity is currently generating about 0.05 per unit of risk. If you would invest  7,489  in IPG Photonics on September 27, 2024 and sell it today you would earn a total of  144.00  from holding IPG Photonics or generate 1.92% return on investment over 90 days.

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

IPG Photonics  vs.  Papaya Growth Opportunity

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.

Papaya Growth Opportunity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Papaya Growth Opportunity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Papaya Growth is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IPG Photonics and Papaya Growth

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

The idea behind IPG Photonics and Papaya Growth Opportunity 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.