Correlation Between IPG Photonics and Western Acquisition

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

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

Diversification Opportunities for IPG Photonics and Western Acquisition

0.29

Correlation Coefficient

IPG Photonics  Western Acquisition

Modest diversification

The 3 months correlation between IPG and Western is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition 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 Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of IPG Photonics i.e., IPG Photonics and Western Acquisition go up and down completely randomly.

Pair Corralation between IPG Photonics and Western Acquisition

Given the investment horizon of 90 days IPG Photonics is expected to generate 1.69 times more return on investment than Western Acquisition. However, IPG Photonics is 1.69 times more volatile than Western Acquisition Ventures. It trades about -0.02 of its potential returns per unit of risk. Western Acquisition Ventures is currently generating about -0.16 per unit of risk. If you would invest  7,927  in IPG Photonics on September 27, 2024 and sell it today you would lose (294.00) from holding IPG Photonics or give up 3.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

IPG Photonics  vs.  Western Acquisition Ventures

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.

Western Acquisition

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Western Acquisition is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IPG Photonics and Western Acquisition

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

The idea behind IPG Photonics and Western Acquisition Ventures 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.