Correlation Between IPG Photonics and Sligro Food

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

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

Diversification Opportunities for IPG Photonics and Sligro Food

0.15

Correlation Coefficient

IPG Photonics  Sligro Food

Average diversification

The 3 months correlation between IPG and Sligro is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Sligro Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sligro Food Group 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 Sligro Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sligro Food Group has no effect on the direction of IPG Photonics i.e., IPG Photonics and Sligro Food go up and down completely randomly.

Pair Corralation between IPG Photonics and Sligro Food

Given the investment horizon of 90 days IPG Photonics is expected to generate 0.87 times more return on investment than Sligro Food. However, IPG Photonics is 1.15 times less risky than Sligro Food. It trades about -0.06 of its potential returns per unit of risk. Sligro Food Group is currently generating about -0.21 per unit of risk. If you would invest  8,057  in IPG Photonics on September 5, 2024 and sell it today you would lose (276.00) from holding IPG Photonics or give up 3.43% of portfolio value over 90 days.

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

IPG Photonics  vs.  Sligro Food Group

IPG Photonics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IPG Photonics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, IPG Photonics reported solid returns over the last few months and may actually be approaching a breakup point.

Sligro Food Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sligro Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with IPG Photonics and Sligro Food

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

The idea behind IPG Photonics and Sligro Food Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.