Correlation Between IPG Photonics and TARGA

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

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

Diversification Opportunities for IPG Photonics and TARGA

-0.65

Correlation Coefficient

IPG Photonics  TARGA

Excellent diversification

The 3 months correlation between IPG and TARGA is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and TARGA RES PARTNERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TARGA RES PARTNERS 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 TARGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TARGA RES PARTNERS has no effect on the direction of IPG Photonics i.e., IPG Photonics and TARGA go up and down completely randomly.

Pair Corralation between IPG Photonics and TARGA

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the TARGA. In addition to that, IPG Photonics is 7.17 times more volatile than TARGA RES PARTNERS. It trades about 0.0 of its total potential returns per unit of risk. TARGA RES PARTNERS is currently generating about 0.0 per unit of volatility. If you would invest  10,126  in TARGA RES PARTNERS on September 12, 2024 and sell it today you would lose (98.00) from holding TARGA RES PARTNERS or give up 0.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.38%
Values	Daily Returns

IPG Photonics  vs.  TARGA RES PARTNERS

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.

TARGA RES PARTNERS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IPG Photonics and TARGA

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

The idea behind IPG Photonics and TARGA RES PARTNERS 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.