Correlation Between IPG Photonics and 833034AL5

Can any of the company-specific risk be diversified away by investing in both IPG Photonics and 833034AL5 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 833034AL5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IPG Photonics and SNAP ON INC, you can compare the effects of market volatilities on IPG Photonics and 833034AL5 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 833034AL5. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and 833034AL5.

Diversification Opportunities for IPG Photonics and 833034AL5

0.06

Correlation Coefficient

IPG Photonics  833034AL5

Significant diversification

The 3 months correlation between IPG and 833034AL5 is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and SNAP ON INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNAP ON INC 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 833034AL5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNAP ON INC has no effect on the direction of IPG Photonics i.e., IPG Photonics and 833034AL5 go up and down completely randomly.

Pair Corralation between IPG Photonics and 833034AL5

Given the investment horizon of 90 days IPG Photonics is expected to generate 1.5 times more return on investment than 833034AL5. However, IPG Photonics is 1.5 times more volatile than SNAP ON INC. It trades about 0.13 of its potential returns per unit of risk. SNAP ON INC is currently generating about -0.03 per unit of risk. If you would invest  6,554  in IPG Photonics on September 5, 2024 and sell it today you would earn a total of  1,227  from holding IPG Photonics or generate 18.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	58.73%
Values	Daily Returns

IPG Photonics  vs.  SNAP ON INC

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.

SNAP ON INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SNAP ON INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 833034AL5 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 833034AL5

The main advantage of trading using opposite IPG Photonics and 833034AL5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, 833034AL5 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 833034AL5 will offset losses from the drop in 833034AL5's long position.

The idea behind IPG Photonics and SNAP ON INC 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 .