Correlation Between IPG Photonics and CITGO

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

By analyzing existing cross correlation between IPG Photonics and CITGO Petroleum 7, you can compare the effects of market volatilities on IPG Photonics and CITGO 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 CITGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and CITGO.

Diversification Opportunities for IPG Photonics and CITGO

0.22

Correlation Coefficient

IPG Photonics  CITGO

Modest diversification

The 3 months correlation between IPG and CITGO is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and CITGO Petroleum 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITGO Petroleum 7 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 CITGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITGO Petroleum 7 has no effect on the direction of IPG Photonics i.e., IPG Photonics and CITGO go up and down completely randomly.

Pair Corralation between IPG Photonics and CITGO

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the CITGO. In addition to that, IPG Photonics is 15.7 times more volatile than CITGO Petroleum 7. It trades about -0.03 of its total potential returns per unit of risk. CITGO Petroleum 7 is currently generating about -0.01 per unit of volatility. If you would invest  10,010  in CITGO Petroleum 7 on September 26, 2024 and sell it today you would lose (12.00) from holding CITGO Petroleum 7 or give up 0.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	65.6%
Values	Daily Returns

IPG Photonics  vs.  CITGO Petroleum 7

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.

CITGO Petroleum 7

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITGO Petroleum 7 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CITGO is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IPG Photonics and CITGO

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

The idea behind IPG Photonics and CITGO Petroleum 7 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.